[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





 
     THE AFFORDABLE CARE ACT ON SHAKY GROUND: OUTLOOK AND OVERSIGHT

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                AND THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 14, 2016

                               __________

                           Serial No. 114-168
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                           
                           


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
JOHN SHIMKUS, Illinois               BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania        ANNA G. ESHOO, California
GREG WALDEN, Oregon                  ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
STEVE SCALISE, Louisiana             JANICE D. SCHAKOWSKY, Illinois
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            KATHY CASTOR, Florida
LEONARD LANCE, New Jersey            JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky              JERRY McNERNEY, California
PETE OLSON, Texas                    PETER WELCH, Vermont
DAVID B. McKINLEY, West Virginia     BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas                  PAUL TONKO, New York
ADAM KINZINGER, Illinois             JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia         YVETTE D. CLARKE, New York
GUS M. BILIRAKIS, Florida            DAVID LOEBSACK, Iowa
BILL JOHNSON, Ohio                   KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
LEONARD LANCE, New Jersey            JOHN P. SARBANES, Maryland
H. MORGAN GRIFFITH, Virginia         DORIS O. MATSUI, California
GUS M. BILIRAKIS, Florida            BEN RAY LUJAN, New Mexico
BILLY LONG, Missouri                 KURT SCHRADER, Oregon
RENEE L. ELLMERS, North Carolina     JOSEPH P. KENNEDY, III, 
LARRY BUCSHON, Indiana                   Massachusetts
SUSAN W. BROOKS, Indiana             TONY CARDENAS, California
CHRIS COLLINS, New York              FRANK PALLONE, Jr., New Jersey (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)
                                 ------                                

              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
DAVID B. McKINLEY, West Virginia     DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
LARRY BUCSHON, Indiana               JOHN A. YARMUTH, Kentucky
BILL FLORES, Texas                   YVETTE D. CLARKE, New York
SUSAN W. BROOKS, Indiana             JOSEPH P. KENNEDY, III, 
MARKWAYNE MULLIN, Oklahoma               Massachusetts
RICHARD HUDSON, North Carolina       GENE GREEN, Texas
CHRIS COLLINS, New York              PETER WELCH, Vermont
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     2
    Prepared statement...........................................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     3
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     5
    Prepared statement...........................................     6
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     8
    Prepared statement...........................................    10
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, prepared statement........................    11

                               Witnesses

Andy Slavitt, Acting Administrator for Centers for Medicare & 
  Medicaid Services..............................................    13
    Prepared statement...........................................    16
    Answers to submitted questions \1\...........................   103
Gloria Jarmon, Deputy Inspector General for Audit Services, 
  Office of Audit Services, Office of Inspector General..........    26
    Prepared statement...........................................    28
Seto Bagdoyan, Director of Forensic Audits and Investigative 
  Service, U.S. Government Accountability Office.................    38
    Prepared statement...........................................    40

                           Submitted Material

GAO Report, September 2016, \2\ submitted by Ms. DeGette
Article entitled, ``Long's Short Report--Affordable Care Act's 
  effects on education,'' by U.S. Representative Billy Long......    96
Article entitled, ``Uncertainty surrounds whether newly Medicaid-
  eligible in Louisiana can keep their Obamacare plans if prefer 
  them,'' The Advocate, July 3, 2016, submitted by Mr. Guthrie...    98

----------
\1\ Mr. Slavitt did not respond to questions for the record.
\2\ Available at: http://docs.house.gov/meetings/IF/IF02/
  20160914/105306/HHRG-114-IF02-20160914-SD003.pdf.


     THE AFFORDABLE CARE ACT ON SHAKY GROUND: OUTLOOK AND OVERSIGHT

                              ----------                              


                     WEDNESDAY, SEPTEMBER 14, 2016

                  House of Representatives,
                            Subcommittee on Health,
                                             joint with the
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 210 Capitol Visitor Center, Hon. Joe Pitts (chairman of 
the subcommittee) presiding.
    Members present: Representatives Pitts, Barton, Guthrie, 
Shimkus, Murphy, Blackburn, McMorris Rodgers, Lance, McKinley, 
Griffith, Bilirakis, Long, Ellmers, Bucshon, Flores, Brooks, 
Mullin, Hudson, Collins, Barton, Upton (ex officio), Green, 
Engel, Schakowsky, Castor, Matsui, Tonko, Yarmuth, Schrader, 
Kennedy, Cardenas, and Pallone (ex officio).
    Staff present: Gary Andres, Staff Director; Jennifer 
Barblan, Counsel, Oversight & Investigations; Elena Brennan, 
Staff Assistant; Adam Buckalew, Professional Staff, Health; 
Rebecca Card, Assistant Press Secretary; Karen Christian, 
General Counsel; Ryan Coble, Detailee, Oversight & 
Investigations; Paige Decker, Executive Assistant; Paul 
Edattel, Chief Counsel, Health; Emily Felder, Counsel, 
Oversight & Investigations; Jay Gulshen, Legislative Clerk; 
Brittany Havens, Professional Staff, Oversight & 
Investigations; Charles Ingebretson, Chief Counsel, Oversight & 
Investigations; Emily Martin, Counsel, Oversight & 
Investigations; Chris Sarley, Policy Coordinator, Environment & 
Economy; Jennifer Sherman, Press Secretary; Adrianna Simonelli, 
Prof. Staff Member, Health; Heidi Stirrup, Health Policy 
Coordinator; Luke Wallwork, Staff Assistant; Gregory Watson, 
Legislative Clerk, Communications and Technology; Jean Woodrow, 
Director, Information Technology; Jeff Carroll, Minority Staff 
Director; Ryan Gottschall, Minority GAO Detailee; Tiffany 
Guarascio, Minority Deputy Staff Director and Chief Health 
Advisor; Chris Knauer, Minority Oversight Staff Director; 
Elizabeth Letter, Minority Professional Staff Member; Miles 
Lichtman, Minority Staff Assistant; Dan Miller, Minority Staff 
Assistant; Rachel Pryor, Minority Health Policy Advisor; 
Samantha Satchell, Minority Policy Analyst; Arielle Woronoff, 
Minority Health Counsel; and C.J. Young, Minority Press 
Secretary.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. The subcommittee will come to order. The chair 
will recognize himself for an opening statement. Today's 
hearing is especially timely as we learn startling news over 
the summer, confirming our worst fears that some of the most 
significant health insurers--United Health, Aetna, Humana--are 
opting out of the Affordable Care Act's health insurance 
exchanges. This is concerning on several levels, the most basic 
being for individuals who are paying more only to get less.
    One of the most ambitious aspects of the Affordable Care 
Act, the ACA, was the creation of the health insurance 
marketplaces. Proponents of the ACA said it would increase 
market competition and lead to lower costs for consumers and 
insurers, but in fact just the opposite has happened. Consumer 
health insurance options are now more limited and insurers have 
been driven out of the ACA marketplace. The exchanges have 
faced numerous problems: lower than expected enrollment with 
sicker people enrolling; larger, unpredictable operational 
costs; and insurers leaving the exchanges.
    Of particular concern are the persistent vulnerabilities of 
the application, eligibility,and enrollment processes. Just 
this week, the Government Accountability Office released two 
reports detailing the severity of the lack of real safeguards 
in the exchanges. Of the 18 fictitious applications GAO made 
for subsidized plans in 2015, 17 received coverage. GAO was 
initially 15 for 15 in 2016, with one fictitious applicant 
enrolling in three different states at the same time.
    Also of interest, Section 1322 of the ACA established the 
Consumer Operated and Oriented Plan, CO-OP program, but these 
too are failing, one as recently as Tuesday, and disrupting 
coverage for thousands of enrollees. CO-OPs were set up to 
increase competition, but instead of the original 23 CO-OPs 
funded with 2.3 billion taxpayer dollars only six are still in 
existence, further reducing coverage for thousands of people in 
the middle of the plan year, resulting in higher out-of-pocket 
costs and changing doctors.
    Our Oversight and Investigations Committee has conducted 
critical work in this area as well as on the functionality of 
state-based exchanges. The staff reports we will review today 
are thorough and provide a sad reminder of the failed promises 
this misguided law delivers.
    We have before our committees today some of the very 
officials who can answer our questions surrounding these 
troubling reports: the acting CMS administrator, the HHS OIG 
deputy inspector general for Audit Services, and the Government 
Accountability Office.
    I look forward to hearing about the oversight work 
conducted by the GAO and HHS OIG, as well as the steps taken by 
CMS to improve the exchange risks and CO-OP programs. The chair 
now recognizes the ranking member of the Health subcommittee, 
Mr. Green, 5 minutes for his opening statement.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Today's hearing is especially timely as we learned 
startling news over the summer, confirming our worst fears, 
that the some of the most significant health insurers--
UnitedHealth, Aetna, Humana--are opting out of Obamacare's 
health insurance exchanges. This is concerning on several 
levels--the most basic being for individuals who are paying 
more only to get less.
    One of the most ambitious aspects of the Affordable Care 
Act (ACA) was the creation of the health insurance 
marketplaces. Proponents of the ACA said it would increase 
market competition and lead to lower costs for consumers and 
insurers. But in fact, just the opposite has happened. Consumer 
health insurance options are now more limited, and insurers 
have been driven out of the ACA marketplace.
    The exchanges have faced numerous problems--lower than 
expected enrollment with sicker people enrolling; larger, 
unpredictable operational costs; and, insurers leaving the 
exchanges.
    Of particular concern are the persistent vulnerabilities of 
the application, eligibility, and enrollment processes. Just 
this week, the Government Accountability Office released two 
reports detailing the severity of the lack of real safeguards 
in the exchanges. Of the 18 fictitious applications GAO made 
for subsidized plans in 2015, 17 received coverage. GAO was 
initially 15 for 15 in 2016, with one fictitious applicant 
enrolling in three different states at the same time.
    Also of interest, Section 1322 of the ACA established the 
Consumer Operated and Oriented Plan (CO-OP) program. But these, 
too, are failing (one as recently as Tuesday)--and disrupting 
coverage for thousands of enrollees. Co-ops were set up to 
increase competition. But instead of the original 23 co-ops 
funded with $2.3 billion taxpayer dollars, only six are still 
in existence further reducing coverage for thousands of 
people--in the middle of the plan year, resulting in higher out 
of pocket costs and changing doctors.
    Our Oversight and Investigations Committee has conducted 
critical work in this area as well as on the functionality of 
state--based exchanges. The staff reports we will review today 
are thorough and provide a sad reminder of the failed promises 
this misguided law delivers.
    We have before our committees today some of the very 
officials who can answer our questions surrounding these 
troubling reports--the Acting CMS Administrator, the HHS OIG 
Deputy Inspector General for Audit Services, and the Government 
Accountability Office.
    I look forward to hearing about the oversight work 
conducted by the GAO and HHS OIG; as well as the steps taken by 
CMS to improve exchange risks and CO-OP programs.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. It is just 6 years 
since enactment and 3 years since the major reforms of the 
Affordable Care Act, the ACA, went into effect. The law is 
delivered on a principal goal of covering millions of 
previously uninsured Americans. Today, 20 million more people 
have insurance, health insurance, and the percentage of the 
uninsured Americans is at an all-time low. This is a historic 
and dramatic improvement over where we were as a nation before 
the ACA and should not be undervalued.
    All this is achieved in spite of relentless political 
opposition, constant efforts to undermine and chip away at the 
law, severe underfunding, and the inherent challenges of 
launching a stabilizing and new marketplace. As we look at the 
future of the ACA great opportunities exist to improve the law, 
but we can't take them unless we move from this bitter 
partisanship. It is long past time for some to accept the ACA 
as the law of the land and get back to work on behalf the 
American people.
    Prior to the Affordable Care Act, the individual health 
insurance market was deeply broken. People were sold junk plans 
at high cost, many individuals with preexisting conditions were 
essentially locked out of the market altogether and plans could 
drop you at the moment you got sick, the time when you needed 
the coverage the most. As a result of the ACA, the newly 
insured, previously insured are protected from the worst abuses 
in the industry and the standard for what plans must cover is 
significantly more robust.
    Marketplace premiums are currently 12 to 20 percent lower 
than the Congressional Budget Office predicted when the ACA was 
passed. Premiums for 150 million Americans with employer 
coverage have grown more slowly than before the law was 
enacted. The marketplace created under the Affordable Care Act 
is in its relative infancy, but with almost every new market 
there is an adjustment period in the early years. We saw this 
when Medicare Advantage and Part D programs were created.
    Recent reports of high premium increase and carriers 
entering and exiting the exchanges have garnered much 
attention. We have seen similar headlines in years before, but 
the reality on the ground has yet to reflect the predictions of 
doom and gloom. Insurers will both enter and exit the 
marketplace as they navigate the new landscape of millions of 
new customers and consumer protections.
    It is no surprise that companies are adapting at different 
rates to the market. They compete for business on cost and 
quality rather than cherry picking customers and denying 
coverage to people with preexisting conditions. The Affordable 
Care Act is working; like any law it is not perfect. It would 
take an earnest effort on the part of Congress and the States 
and regulators to bring forth solutions that further stabilize 
the market. This can only be done if we are honest and separate 
overblown portrayals that don't reflect the facts of the 
meaningful critiques.
    For several reasons 2017 is the unique transition year. One 
reason is that the programs designed to support the market in 
the early years are ending and will have a one-time effect on 
cost. Yet we also see the marketplace risk pool strengthened by 
robust outreach efforts to the young adults not yet taking 
advantage of the opportunity to get coverage.
    The Department of Health and Human Services, HHS, is also 
taking steps such as developing new processes to prevent misuse 
of special enrollment periods and curb abuse of short-term 
plans that keep healthy customers out of the risk pool.
    Nineteen states also need to expand Medicaid. In my 
district in Texas, and Texas is one of those 19 states, if they 
expanded Medicaid 50,000 of my constituents would have 
Medicaid, if the state expanded it. The law was designed on the 
assumption that all states would, and refusal to do distorts 
the health care ecosystem.
    A recent report from HHS shows that not only does Medicaid 
expansion have enormous economic benefits for states, but on 
the average marketplace premiums in expansion states are 7 
percent lower than those non-expansion states. The ACA has led 
to higher consumer satisfaction and lower uninsured rates. Data 
supports the further stabilization of the marketplace in the 
future.
    It is now time for Congress to put aside partisanship and 
finally come together and improve the law. The American people 
are counting on it. And I look forward to hearing from our 
witnesses, and I thank you, Mr. Chairman, and I yield back my 
time.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Pennsylvania, Dr. Murphy, chair 
of the O&I Subcommittee, 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Thank you, Mr. Chairman. This committee began 
its investigation of the state-based exchanges in the spring of 
2015, and we aimed to examine why the state exchanges failed to 
correctly and effectively utilize billions in federal grant 
funding. The committee requested and received documents from 
the 17 original state exchanges, and over the course of two 
hearings we heard testimony from state exchanges' leaders and 
federal officials.
    Our investigation found that the Center for Medicare & 
Medicaid Services, CMS, effectively wasted $4.6 billion in 
grants due to excessively careless management and oversight. 
Disappointingly, and despite the fact that four out of the 17 
state exchanges have now closed down, a very small and very 
inconsequential amount of improperly spent federal dollars have 
been recouped by CMS.
    We were told that state exchanges would be self-sustaining 
by January 1st, 2015, and afterwards any continued use of 
federal grant money would be illegal. Yet today every state 
exchange is still using federal money. Moreover, some state 
exchanges went so far as to violate federal rules and use 
Medicaid dollars to pay for unallowable state-based exchange 
expenses. The details and findings from the committee 
investigations are outlined in our report that was released 
yesterday, September 13, 2016.
    In addition to the work that we have done on state 
exchanges, the subcommittee held a hearing last November on the 
CO-OPs and their costly failures. We examined the factors that 
contributed to the collapse of now 17 out of 23 CO-OPs, what 
oversight mechanisms CMS used to monitor the CO-OPs, and the 
likelihood that the federal government would recoup any of the 
loans awarded to the failed CO-OPs.
    Since the hearing in November, five more CO-OPs have closed 
leaving only six of the original 23 remaining. And these failed 
CO-OPs have cost the taxpayers a total of $1.8 billion. Similar 
to the state exchanges, the committee's investigation into the 
CO-OPs found that they were disadvantaged from the start. 
Rigorous loan agreements, restrictions to obtain outside 
capital, and flawed premium stabilization programs made 
financial stability near impossible.
    What ultimately contributed to the failure of CO-OPs, 
however, was CMS mismanagement and ineffective oversight as 
they failed on numerous occasions to assist the CO-OPs when 
needed. Recently, HHS OIG released a report which found that 
the majority of CO-OPs are nearing bankruptcy, making it highly 
unlikely that the remaining six CO-OPs will pay back any of 
their loans. This will result in the loss of even more taxpayer 
money and leaving hundreds of thousands of Americans displaced 
with insurance coverage. The details and findings from the 
committee's investigation are outlined in our report that we 
released yesterday.
    While we look forward to a productive dialogue with our 
witnesses today, I want to note that on behalf of this 
committee we are deeply troubled by the findings of this 
investigation. Ultimately, what we are seeing is the Affordable 
Care Act failing the American people. The objective of the law 
was to provide health insurance to those who could not afford 
it, yet these findings prove that the ACA is accomplishing just 
the opposite.
    Hundreds of Americans have been uprooted from their plans 
and left without any insurance coverage, thousands I should 
say. Both of the committee reports suggest recommendations for 
legislative and administrative changes to address the concerns 
highlighted in the reports. It is my hope then that we are able 
to have an honest and open conversation about the reality of 
this legislation and discuss solutions rather than continue to 
identify its well known problems.
    I thank the witnesses for testifying today and look forward 
to hearing the questions, and with that Mr. Chairman I yield 
back.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    Today, we are here to examine two failed programs of the 
Affordable Care Act (ACA): the State-Based Exchanges and the 
Consumer Oriented and Operated Plans, known as ``CO-OPs''. 
First, I want to highlight and thank the HHS Inspector General 
and the Government Accountability Office for their continued 
participation and good work for this Committee. This hearing, 
as part of the ongoing oversight of the ACA, will specifically 
focus on the current state of implementation and challenges of 
the State-Based Exchanges and CO-OPs.
    The Committee began its investigation of the State-Based 
Exchanges in the spring of 2015. We aimed to examine why the 
state exchanges failed to correctly and effectively utilize 
billions in federal grant funding. The Committee requested and 
received documents from the 17 original state exchanges, and 
over the course of two hearings, heard testimony from state 
exchange leaders and federal officials.
    Our investigation found that the Centers for Medicare & 
Medicaid Services (CMS) effectively wasted $4.6 billion in 
grants due to excessively careless management and oversight. 
Disappointingly--and despite the fact that four out of 17 state 
exchanges have closed down--a very small, and very 
inconsequential, amount of improperly spent federal dollars 
have been recouped by CMS.
    We were told that state exchanges would be self-sustaining 
by January 1, 2015 and afterwards, any continued use of federal 
grant money would be illegal. Yet today, every state exchange 
is still using federal money. Moreover, some state exchanges 
went so far as to violate federal rules and used Medicaid 
dollars to pay for unallowable state-based exchange expenses. 
The details and findings from the Committees' investigation are 
outlined in our report that was released yesterday, September 
13, 2016.
    In addition to the work that we have done on State 
Exchanges, the Subcommittee held a hearing last November on the 
CO-OPs and their costly failures. We examined the factors that 
contributed to the collapse of now 17 out of 23 CO-OPs; what 
oversight mechanisms CMS used to monitor the CO-OPs; and the 
likelihood that the federal government would recoup any of the 
loans awarded to the failed CO-OPs.
    Since the hearing in November, five more CO-OPs have 
closed, leaving only six of the original 23 remaining. These 
failed CO-OPs have cost the American taxpayers a total of $1.8 
billion dollars. Similar to the state exchanges, the 
Committee's investigation into the CO-OPs found that they were 
disadvantaged from the start--rigorous loan agreements, 
restrictions to obtain outside capital, and flawed premium 
stabilization programs made financial stability near 
impossible.
    What ultimately contributed to the failure of CO-OPs, 
however, was CMS' mismanagement and ineffective oversight, as 
they failed on numerous occasions to assist the CO-OPs when 
needed. Recently, HHS-OIG released a report which found that 
the majority of CO-OPs are nearing bankruptcy, making it highly 
unlikely that the remaining six CO-OPs will pay back their 
loans. This will result in the loss of even more taxpayer money 
and leaving hundreds of thousands of Americans displaced with 
insurance coverage. The details and findings from the 
Committees' investigation are outlined in our report that was 
released yesterday, September 13, 2016.
    While we look forward to a productive dialogue with our 
witnesses today, I want to note that on behalf of this 
Committee, we are deeply troubled by the findings of this 
investigation. Ultimately, what we are seeing is the Affordable 
Care Act failing the American people. The objective of the law 
was to provide health insurance to those who could not afford 
it, yet these findings prove that the ACA is accomplishing just 
the opposite. Hundreds of Americans have been uprooted from 
their plans and left without any insurance coverage. Both of 
the Committee reports suggest recommendations for legislative 
and administrative changes to address the concerns highlighted 
in the reports. It is my hope, then, that we are able to have 
an honest and open conversation about the reality of this 
legislation and discuss solutions, rather than continuing to 
identify its well-known problems.
    Today we will hear from CMS' Acting Administrator Andy 
Slavitt, the Deputy Inspector General for Audit Services at the 
HHS OIG Ms. Gloria Jarmon, and Director of Audit Services for 
GAO's Forensic Audit and Investigative Services mission team, 
Mr. Seto Bagdoyan. I thank the witnesses for testifying today 
and look forward to hearing answers to our questions.

    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the ranking member of the Oversight and 
Investigation Committee, Ms. DeGette from Colorado, 5 minutes 
for opening statement.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you so much, Mr. Chairman. I have been 
wondering about the Affordable Care Act. Do you know if it 
covers treatment for deja vu, because there seems to be a mass 
outbreak of that on Capitol Hill when it comes to the ACA. Here 
are some of the symptoms.
    One, between the Health Subcommittee and the Oversight 
Subcommittee as you heard that I am ranking member of, we have 
had over 40 hearings on the ACA since it became law in 2010. 
Two, we have been through 6 years of efforts to repeal and 
undermine the law. Three, we have seen any number of 
administration officials, some of whom are sitting here today, 
interrogated by hostile members of Congress about their work to 
implement the law. These same officials have been the target of 
countless letters requesting briefings and documentation of 
every single aspect of their work.
    But despite the hours and hours spent on these efforts, 
House Republicans have nothing to show for it. Mr. Murphy, my 
chairman on the Oversight Subcommittee, just mentioned the 
recent Oversight & Investigations hearings that we have had in 
our committee. Instead of conducting a good faith review of 
these issues followed up by targeted, thoughtful bipartisan 
legislation to improve the law as Congress did on other major 
pieces of health care legislation like the Medicare Part D 
program that was passed by the Republican Congress some years 
ago, this Congress has used its oversight powers to highlight 
failures over and over again while offering no solutions.
    As we just heard from Mr. Murphy we have had two hearings 
this Congress on the ACA state insurance marketplaces, but 
again we are going to hear today about how some states struggle 
to set up exchanges and make them work as efficiently as 
possible. As you heard, we had a hearing earlier this Congress 
about the CO-OPs and I am sure we are going to hear today again 
about the fact that many CO-OPs, including one in my state of 
Colorado, have failed or are facing challenges.
    This is not news, folks. What would be news is if the 
majority would actually sit down with us and try to work out 
some solutions to help more and more Americans get affordable 
and expansive health care insurance. I am not saying that these 
issues are not worth congressional attention. But what I am 
saying is it is time to stop having this kabuki dance over and 
over again, and it is time to start figuring out how we can fix 
the Affordable Care Act.
    Highlighting solutions or making important course 
corrections requires a willing Congress and at this point my 
colleagues on the other side of the aisle don't seem to be 
willing to admit to the public that the law has actually helped 
millions of people and it simply needs fixing rather than being 
repealed.
    Now in conversation privately with me, many of my 
colleagues on the other side of the aisle offer thoughts that 
perhaps we can work on this together in the next Congress. But 
in the meantime, all we are doing is having hearing after 
hearing and wasting a lot of time and money that could be spent 
giving more insurance to more people on these hearings.
    Let me just briefly in the final remaining seconds that I 
have remind people of what the ACA has done even with the flaws 
that it has. We have had historic reductions in the number of 
uninsured people in this country. The CDC reported last week 
that the uninsured rate is at a historic low, the lowest that 
we have had in four decades. That is an accomplishment. Since 
the passage of the ACA, 20 million previously uninsured 
Americans now have coverage. This includes millions of young 
adults who can now stay on their parents' plans until age 26.
    I just want to interject a personal note here. My daughter 
Francesca who everybody on this committee knows, she just 
graduated from college. She is 22 years old. She is also a type 
1 diabetic. Francesca just left to go teach in Madrid for a 
year, to teach English in Madrid for a year, and she is on my 
insurance. And because of the Affordable Care Act she can't get 
thrown off of my insurance because she has a preexisting 
condition or because she is over 21. And furthermore, we were 
able to get her a year's worth of diabetic supplies before she 
left for Madrid.
    There are thousands of families in the United States who 
are benefiting in the way my family has, and I am going to 
fight until the end to make sure that they can keep these 
benefits and that we can keep expanding it so that every 
American has high quality health insurance. I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the Chairman of the full committee, the gentleman 
from Michigan, Mr. Upton, 5 minutes for an opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman. So in 2009, the 
American people were promised a new health care system, one 
that would give patients a one-stop shop to choose a plan that 
would be affordable. And of course at that time we remember the 
President saying you will have your choice of a number of plans 
that offer a few different packages, but every plan would offer 
an affordable basic package.
    So 6 years later the facts tell, I think, a different 
story. Major health insurers like Aetna, Humana, United fleeing 
the exchanges, leaving as many as one third of counties and 
seven entire states with only one carrier. And with New 
Jersey's collapse this week, 17 CO-OPs have now closed their 
doors costing taxpayers nearly $2 billion and resulting in tens 
of thousands of Americans without a plan. And today, just 12 
states are running their own exchange, 12. Premiums are off the 
charts; competition has dramatically declined; all in all, the 
everyday patient is left paying for fewer choices.
    But every number has a name and each one of these patients 
indeed have a story to tell. Karen from Lawton, Michigan tells 
us she pays $700 for insurance. She and her kids are in the 
process of choosing between having a home or having health 
insurance and moving back with her folks. She says because of 
the Affordable Care Act my insurance has doubled. Please, you 
have to do something to help me, help the hardworking middle 
class in this country.
     Lisa lives about an hour east of Karen and her kids. She 
is paying $744 a month for a plan with a $3,000 deductible. 
Before the ACA she paid less than $300 a month for her family's 
health care, and my bet is she wishes she had the plan she had 
before. Greg who lives with his wife of 40 years in Kalamazoo 
is feeling the pain. He says ACA is a disaster; has been from 
the start. I think he is right.
    When this law was sold to struggling Michiganders and 
patients across our country, they were promised that as many as 
21 million new individuals would get coverage through exchanges 
by the end of 2016. Sadly, even with the individual and 
employer mandates, this number is set to come in at about half, 
simply one reason why House Republicans have offered a better 
way to help patients get and keep health insurance.
    Our solution puts patients first, improves the quality of 
care, lowers health care costs, restores freedom and 
flexibility, it also keeps patients on their parents' insurance 
until they are 26 years old and will not deny coverage based on 
preexisting conditions. We want to lead the world in cures and 
treatments, and our plan builds upon this important work 
outlined in the 21st Century CURES Act to help deliver cures 
now.
    Recent nonpartisan analysis of our reform plan found that 
solutions would, in fact, lower premiums by 10 to 35 percent, 
increase access to doctors and boost medical productivity all 
while cutting the deficit by nearly half a trillion dollars 
over the next decade. The ambitious plan, one where nobody 
would be priced out of health care, everyone in Michigan, these 
three--Karen, Lisa and Greg--and across America deserves access 
to quality and affordable health care. I yield the balance of 
my time to the gentlelady from Tennessee.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    In 2009, the American people were promised a new health 
care system: one that would give patients a one-stop shop to 
choose a plan that would be affordable. At the time, the 
president said, and I quote, ``You will have your choice of a 
number of plans that offer a few different packages, but every 
plan would offer an affordable, basic package.''
    Six years later, the facts tell a different story. Major 
health insurers--like Aetna, Humana, and UnitedHealth--are 
fleeing the exchanges, leaving as many as one-third of counties 
and seven entire states with only one carrier. With New 
Jersey's collapse this week, 17 CO-OPs have now closed their 
doors, costing taxpayers over $1.8 billion and resulting in 
tens of thousands of Americans without a plan. And today, just 
12 states are running their own exchange.
    Premiums are off the charts. Competition has dramatically 
declined. All in all, the everyday patient is left paying more 
for fewer choices. But every number has a name. And each one of 
these patients has a story to tell.
    Take Karen from Lawton, Michigan. She pays $700 a month for 
her insurance. Karen and her kids are in the process of 
choosing between having a home, or having health insurance and 
moving back in with her parents.
    ``Because of the Affordable Care Act my insurance has 
doubled. Please,'' Karen pleaded, ``you have to do something to 
help the hard working middle class in this country.''
    Or Lisa, who lives about an hour east of Karen and her 
kids. She's paying $744 a month for a plan with a $3,000 
deductible. Before the Affordable Care Act, Lisa paid less than 
$300 a month for her family's health care.
    Greg, who lives with his wife of 40 years in Kalamazoo, is 
feeling the pain too. ``The ACA is a disaster,'' Greg said. 
``has been from the start.''
    Greg's right. When this law was sold to struggling 
Michiganders and patients across our country, they were 
promised that as many as 21 million individuals would get 
coverage through exchanges by the end of 2016. Sadly, even with 
the individual and employer mandates, this number is set to 
come in at about half.
    This is simply one reason why House Republicans have 
offered a better way to help patients get--and keep--health 
coverage. Our solutions put patients first, improve the quality 
of care, lower health care costs, and restore freedom and 
flexibility. It also keeps patients on their parents insurance 
until they are 26 years old, and will not deny coverage based 
on pre--existing conditions. We want to lead the world in cures 
and treatments, and our plan builds upon the important work 
outlined in the 21st Century Cures Act to help deliver cures 
now.
    A recent non-partisan analysis of our reform plan found 
that the solutions would lower premiums by 10 to 35 percent, 
increase access to doctors, and boost medical productivity--all 
while cutting the deficit by $481 billion over the next decade.
    It's an ambitious plan--one where nobody would be priced 
out of health care. Everyone in Michigan--Karen, Lisa, Greg--
and across America deserves access to quality, affordable 
health care.

    Mrs. Blackburn. And thank you, Mr. Chairman, and thank you 
all for being here to talk with us today. We do look at this 
plan and we realize that the Affordable Care Act product is 
unaffordable and that it is indeed on shaky ground as the 
hearing title reflects.
    I will spend some of my time today talking with you about 
the special enrollment periods. I come from Tennessee. We had 
TennCare. We know that these special enrollment periods have a 
tendency to get these programs into trouble. Lack of 
verification, inappropriate verification, delayed verification, 
all of a sudden what you do is end up with a plan that is on 
shaky ground and with out-of-balance risk pools.
    So as you look at the imbalance within these, we will want 
to drill down on that just a little bit. I do have legislation, 
H.R. 5589, the Plan Verification and Fairness Act that would 
get to the heart of this issue because it is a problem that 
worsens every single day. And when you have a SEP where there 
is not the appropriate oversight or due diligence, then you do 
end up with the imbalances in these risk pools.
    So welcome, we look forward to the hearing, and I yield 
back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the ranking member of the full committee, the 
gentleman from New Jersey, Mr. Pallone, 5 minutes for opening 
statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman. This will be our 
committee's 10th hearing on the law, the Affordable Care Act, 
just this Congress, and while I continue to hope that my 
Republican colleagues will come to their senses and finally 
hold a hearing to work in a bipartisan way to improve the ACA, 
unfortunately once again this will not be that day.
    It is clear that the GOP just wants to repeal the ACA and 
continue to point out problems with the health care system in 
general without proposing any alternatives. And we are here 
today to discuss four reports on different aspects of the 
Affordable Care Act, two of which were only made available to 
staff and the public on Monday.
    Now one report by the Office of the Inspector General on 
the conversion of start-up loans by CO-OPs found that no 
wrongdoing occurred. The report simply found that the CO-OPs 
were in compliance with CMS guidance and accounting principles 
when converting start-up loans.
    Another report released by the GAO this month examines 
health insurance market concentration and competition in 2014 
finding that enrollees tend to be concentrated among only a few 
issuers. However, since this report analyzes data collected 
prior to the implementation of the ACA's insurance exchanges, 
it does not shed light on whether the exchanges have affected 
market concentration. We will also be discussing a report that 
is a continuation of the GAO's fake shopper investigation in 
which GAO used fake identities and fake documents to attempt to 
enroll in coverage through the health insurance marketplaces 
and Medicaid.
    And let me just start by saying that I will continue to be 
critical of the way the GAO carried out this investigation. It 
is inconceivable to me that anyone would be skilled enough or 
motivated enough to try to fraudulently gain health insurance 
coverage this way, particularly since there is no possible 
scenario in which an individual could financially gain from 
gaming the system.
    Even if someone were to obtain health insurance with 
fraudulent information, they would still need to pay premiums 
and any other out-of-pocket costs associated with their plan to 
actually get medical services. Nevertheless, for the third year 
in a row GAO continues with this farce. They created false 
identities and attempted to enroll in coverage concluding that 
the system remains vulnerable to fraud.
    Republicans have translated this conclusion to mean that 
this sort of fraudulent enrollment is rampant in the 
marketplace, and I think to use this deeply flawed GAO report 
to try to say that people can get so-called free health 
insurance is utterly ridiculous. In fact, GAO's fake shoppers 
paid premiums each month and did not seek any health care. This 
report fails to answer two very important questions. Is this a 
real problem, and if it is how can we fix it? These are 
questions Democrats are interested in answering, yet once again 
GAO has not provided CMS with the information and the fake 
identities it created. This information could help the agency 
learn from GAO's work and fix potential vulnerabilities in the 
systems.
    Now Democrats care about program integrity and oversight, 
but once again I suspect this hearing is not about oversight 
but about headlines. As I have already said, it seems entirely 
unrealistic that some of the most vulnerable individuals in 
this country would have the desire, time, money and expertise 
to fraudulently gain coverage the way GAO did in their study, 
and GAO's lack of recommendations in this report is very 
disappointing. We and the Administration rely on GAO for 
unbiased reports and recommendations, and these fake shoppers 
provide neither.
    Now let me talk about the success of the ACA because 
Republicans would make you think that the health care system 
was better off before the ACA. We can't forget that thanks to 
the ACA, the uninsured rate is at an all-time low, 20 million 
more people now have health coverage, and the vast majority are 
satisfied with their coverage. It is important to remember that 
because of the ACA, Americans now have access to free 
preventive services, kids can stay on their parents' plan up to 
26, and there are no lifetime or annual limits on coverage. 
Since the enactment of the ACA, the solvency of the Medicare 
Trust Fund has been extended for 13 years. In addition, 
unnecessary hospital readmissions in Medicare have fallen for 
the first time on record, resulting in a hundred thousand fewer 
readmissions in 2015 alone.
    The ACA's marketplaces are new. The ACA's consumer 
protections are new. As with almost every new law there will be 
necessary changes and adjustments, but what is different about 
this law is that we have not been able to make those changes. 
Instead of working together to make sure the law works for 
everyone, my colleagues on the other side of the aisle have 
tried to repeal this law more than 60 times and we have met 
resistance at every turn.
    There are absolutely ways that we can improve upon the 
ACA's successes, expand access to affordable coverage, and 
reduce the number of uninsured. Unfortunately, no one on the 
Republican side wants to improve anything. All we hear from my 
colleagues on the other side is negativity. My colleague from 
Tennessee who I love is still talking about TennCare. I don't 
know how many times I am going to hear about TennCare. I mean, 
I don't even think TennCare exists anymore. If it does, it is 
certainly not what it was.
    And this is what we get. We just get the constant hearings, 
efforts to say, oh, everything is terrible, everything stinks, 
but whenever we have any suggestion from the--I don't hear 
anything from the other side of the aisle other than, whatever 
has been proposed and whatever we try to do to change the 
system and make it better, which truly has been successful, 
needs to be repealed, needs to be thrown out without any 
suggestion about any alternative that is meaningful.
    So obviously I am not too happy with this hearing today, 
Mr. Chairman, but nonetheless----
    Mr. Pitts. The gentleman's time is expired.
    Mr. Pallone [continuing]. You will continue.
    Mr. Pitts. The chair thanks the gentleman for his opening 
statement. As usual, all the members' written opening 
statements will be made a part of the record.
    At this point I will introduce our panel. We have one panel 
and I will introduce them in the order of their presentation. 
First, Mr. Andy Slavitt, acting administrator of the Center for 
Medicare & Medicaid Services, CMS; Ms. Gloria Jarmon, deputy 
inspector general for Audit Services in the Office of Audit 
Services within the Office of Inspector General, U.S. 
Department of Health and Human Services; and Mr. Seto Bagdoyan, 
director of the Forensic Audits and Investigative Service for 
the U.S. Government Accountability Office.
    Thank you for coming today. We look forward to your 
testimony. Your written testimony will be made a part of the 
record. You will each be recognized for 5 minutes for a 
summary. You are aware that the committee is holding an 
investigative hearing, and when doing so has had the practice 
of taking testimony under oath. Do you have any objection to 
testifying under oath?
    The response is no. The chair then advises you that under 
the rules of the House and the rules of the committee you are 
entitled to be advised by counsel. Do you desire to be advised 
by counsel during your testimony today?
    The response is no. In that case, if you would please rise 
and raise your right hand, I will swear you in.
    [Witnesses sworn.]
    Mr. Pitts. The response is I do. You are now under oath and 
subject to the penalties set forth in Title 18 Section 1001 of 
the United States Code. You may now give a 5 minute summary of 
your written statement. The chair recognizes Mr. Slavitt for 5 
minutes.

 STATEMENTS OF ANDY SLAVITT, ACTING ADMINISTRATOR FOR CENTERS 
    FOR MEDICARE & MEDICAID SERVICES; GLORIA JARMON, DEPUTY 
INSPECTOR GENERAL FOR AUDIT SERVICES, OFFICE OF AUDIT SERVICES, 
  OFFICE OF INSPECTOR GENERAL; AND SETO BAGDOYAN, DIRECTOR OF 
  FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

                   STATEMENT OF ANDY SLAVITT

    Mr. Slavitt. Chairman Pitts and Murphy, Ranking Members 
Green and DeGette, members of the subcommittees, thank you for 
the invitation to this hearing to discuss the progress we have 
made as a country under the Affordable Care Act as well as key 
priorities for improvement.
    With the enactment of the law we've taken a significant 
step together as a nation to provide for the first time access 
to quality care to all Americans regardless of their health or 
financial status. For millions of Americans this represents the 
largest shift in how our health care system works since the 
creation of Medicare more than 50 years ago.
    As you all know well, Medicare which has lifted millions of 
seniors out of poverty was launched amidst great uncertainty. 
It has succeeded by continually evolving to reflect the needs 
of our seniors, adjusting to cover prescription drugs, new 
modes of treatment, and payments which support high quality 
care delivery. I continue to appreciate Congress' leadership on 
Medicare's latest evolution, MACRA, and hope we can continue to 
work together to fulfill your vision of a payment program that 
is focused on affordable, high quality patient care.
    Undertaking fundamental change is rarely easy. From the 
outset, we knew that like Medicare the implementation of the 
Affordable Care Act would be a multiyear process. As we look to 
the fourth open enrollment, we are very proud of what we've 
accomplished so far. More than 20 million people now have 
coverage because of the law. And at 8.6 percent, the uninsured 
rate for Americans is the lowest on record.
    Let me turn to our priorities. First, CMS is learning from 
the early years of implementation using data and feedback to 
refine our policies to build a strong, sustainable marketplace. 
The recommendations and input of the GAO and OIG who have 
together conducted over 50 ACA audits have been especially 
valuable in our efforts to strengthen our processes and 
controls.
    In this vein we've made improvements to the marketplace so 
that it continues to function properly, predictably, and 
securely. This has included changes to risk sharing mechanisms, 
program integrity, and eligibility rules. We are targeting bad 
actors for using the marketplace inappropriately, and we have 
significantly increased compliance with documentation 
requirements. Our mantra is to continually learn and adjust.
    Second, we stand ready to work with states to expand 
Medicaid eligibility and finish the job of covering all 
Americans. Expanding Medicaid not only helps low income people 
gain access to care, but helps reduce marketplace premiums for 
middle income families, and data shows marketplace premiums are 
about 7 percent lower in states that expand Medicaid.
    Third, we know that costs are a critical consideration both 
for purchasing coverage and for taxpayers. The good news for 
the vast majority of Americans is that the Affordable Care Act 
offers important protections to keep coverage affordable. Even 
if premiums were to rise substantially next year, the vast 
majority of federal marketplace consumers will still be able to 
choose a plan for less than $75 per month.
    And the good news for taxpayers is that we've achieved 
these historic coverage gains at a 25 percent lower cost than 
the CBO originally projected. And this has also benefited newly 
covered Americans. Going into 2017, independent experts 
calculate that marketplace premiums are currently 12 to 20 
percent lower than initial predictions. There's no question 
that as a country more people are paying less, getting more and 
with greater consumer protections than before the ACA.
    But of course any conversation on the cost of health 
insurance is actually a conversation about the overall cost of 
care and the value that we get for the money that we spend. At 
CMS, access and affordability for the 140 million Americans we 
serve every day is critical. This is why we must work to keep 
medications affordable, prevent waste and coordinate care, and 
why we have a special task force focusing on access to care in 
rural America, for costs and the lack of competition have long 
created concerns.
    Personally, it's been very rewarding to serve at CMS during 
a time of so much transformation. For the vast majority of my 
25 years in health care it didn't seem possible that we'd ever 
achieve a real reduction in the uninsured rate or see a time 
that having a preexisting condition didn't disqualify a person 
from coverage.
    As the marketplace continues to grow and mature, we'll 
continue to listen, add new capabilities and adapt to best 
serve American patients and taxpayers. Thank you and I'll be 
happy to answer any questions.
    [The prepared statement of Andy Slavitt follows:]
    
    
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    Mr. Pitts. The chair thanks the gentleman and now 
recognizes Ms. Jarmon 5 minutes for your summary.

                   STATEMENT OF GLORIA JARMON

    Ms. Jarmon. Good morning, Chairman Pitts and Murphy, and 
Ranking Members Green and DeGette, and other members of the 
subcommittee. Thank you for the opportunity to testify today 
about the Office of Inspector General's oversight of health 
insurance marketplaces. As part of our strategic plan to 
oversee implementation of the Affordable Care Act, we have 
completed a significant body of audits and evaluations 
addressing federal and state marketplaces and other ACA 
provisions.
    Our marketplace oversight work focuses on payment accuracy, 
eligibility systems, management and administration, and 
security and data of systems. My testimony today focuses on our 
most recent work which is the Consumer Operated and Oriented 
Plans, or CO-OPs, and state marketplaces.
    Regarding our CO-OP work, we recently looked at the 
conversion of start-up loans into surplus notes. These notes 
are bond-like instruments issued to provide capital. We 
conducted this review to assess whether the CO-OPs complied 
with the Centers for Medicare & Medicaid Services guidance and 
applicable accounting principles.
    We found that the CO-OPs generally complied with this 
guidance and applicable accounting principles when converting 
start-up loans into surplus notes. However, CMS did not 
adequately document the potential impact of the conversions on 
the federal government's ability to recover the loan payments 
if the CO-OPs were to fail.
    Based on our findings, we recommended that CMS improve the 
decision making process for any future conversions of start-up 
loans to surplus notes, and document any potential negative 
impact from changes in distribution priority, and to quantify 
the likely impact on the federal government's ability to 
recover loan payments.
    Following up on these recommendations, we are currently 
reassessing the CO-OPs' financial condition to determine if any 
improvements were made in 2015 and 2016. We are also monitoring 
the actions made by CMS to address underperforming CO-OPs. This 
work is expected to be issued during fiscal year 2017.
    Regarding our state marketplaces work we recently completed 
a series of reviews to determine whether marketplaces had 
effective internal controls in place to ensure that individuals 
signing up for health insurance and receiving financial 
assistance through insurance affordability programs are 
eligible. We reviewed the first open enrollment period at seven 
state marketplaces. We found certain internal controls were 
effective. However, most of the state marketplaces had some 
ineffective internal controls for ensuring that individuals 
were enrolled in a qualified health plan in accordance with 
federal requirements.
    With respect to establishment grant funds, we are in the 
process of completing a series of state marketplace reviews and 
their use of these funds. This work primarily focuses on 
whether marketplaces allocated costs to their establishment 
grants in accordance with federal requirements. Recently issued 
reports have determined that some states reviewed used 
allocation percentages based on outdated estimated enrollment 
data instead of updated data that was available. Based on these 
findings we recommended that the states refund misallocated 
amounts or work with CMS to resolve the misallocated amounts.
    With respect to privacy and security of state marketplaces 
we have completed reviews of data and system security at five 
states and are close to completing reviews of two others. All 
of the states for which we have completed reviews have 
implemented some security controls to protect personally 
identifiable information or PII. However, vulnerabilities 
existed in those states and each had at least one vulnerability 
that if exploited could have exposed PII and other sensitive 
information. States generally agreed with our recommendations 
to improve security, and in many instances reported taking 
action to correct identified vulnerabilities.
    In closing, we appreciate the committee's interest in this 
important issue and continue to urge CMS to fully address our 
recommendations related to improving oversight and financial 
solvency of the CO-OP program and state marketplaces. OIG is 
committed to providing continued oversight of these programs to 
help ensure that they operate efficiently, effectively and 
economically.
    This concludes my testimony. I would be happy to answer 
your questions.
    [The prepared statement of Gloria Jarmon follows:]
    
    
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    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes Mr. Seto Bagdoyan 5 minutes for your opening 
statement summary.

                   STATEMENT OF SETO BAGDOYAN

    Mr. Bagdoyan. Thank you and good morning, Chairman Pitts 
and Murphy, Ranking Members Green and DeGette, and members of 
the subcommittees. I'm pleased to be here today to discuss 
three recently issued GAO reports on health care issues.
    This morning at the subcommittee's request I'll focus my 
remarks on the results of undercover testing of enrollment 
processes and related controls used by the federal marketplace 
and the California state marketplace under the ACA for coverage 
year 2016. I'd note that these results are not definitive 
regarding the entire application population. Our work focused 
on identifying indicators of potential enrollment fraud, 
vulnerability and risk for further review as I'll highlight 
shortly. We discussed our results with CMS and the California 
exchange and their responses are included in our final report.
    In terms of what's at risk, ACA coverage is a substantial 
financial commitment for the federal government. About 11 
million enrollees have coverage of which up to 85 percent 
receive subsidies. CFBO estimates subsidy costs for fiscal year 
2017 at about 56 billion and totaling 866 billion for the next 
10 years. In this regard I would note that while subsidies are 
paid directly to insurers, they nevertheless represent a 
financial benefit to enrollees in the form of reduced overall 
costs. That is, premiums and deductibles.
    Turning to our coverage year 2016 results, we initially 
obtained subsidized qualified health plan or Medicaid coverage 
for all 15 fictitious applicants. In doing so we successfully 
worked around all primary enrollment process checks, namely 
identify proofing, submitting documents to clear 
inconsistencies, and filing tax returns to reconcile subsidies.
    We subsequently maintained coverage for 11 applicants to 
the present that is well into the coverage year, even though 
some had not filed tax returns or submitted documentation to 
clear information inconsistencies as required. Our subsidies 
totaled about $60,000 on an annualized basis. We failed to 
maintain coverage for three applicants because of payment 
issues, and for one applicant whose coverage was eventually 
terminated because of intentional failure to submit requested 
documentation.
    These results, combined with those from our earlier work 
involving coverage years 2014 and 2015, form a consistent 
pattern of three principal interrelated fraud risk indicators 
which we're pursuing further during our ongoing ACA related 
work. First, no year-on-year changes in the enrollment 
processes and controls are readily apparent, suggesting that 
these remain fundamentally vulnerable to fraud at multiple 
points along their entire spectrum--front, middle, and end--
raising the overall program integrity risk for ACA.
    Second, applicants intending to act fraudulently to obtain 
coverage in which they're not otherwise entitled, such as our 
fictitious applicants, could exploit the enrollment process and 
its various accommodations such as self-attestation, deadline 
extensions, and relaxed standards for resolving inconsistencies 
to their advantage and maintain policies virtually through the 
entire coverage year.
    Third, even if such applicants subsequently are flagged and 
lose their coverage for administrative compliance issues 
they're able to apply for new coverage the following open 
season as allowed by program rules, thus engaging essentially 
in a form of health coverage arbitrage.
    In closing, I'd underscore that a program of this scope and 
scale is inherently at risk for fraudulent activity and 
accordingly it is essential that a high priority is placed on 
implementing effective preventive enrollment processes and 
controls up front and help narrow the window of opportunity for 
such risk and safeguard the government's substantial 
investment. In this regard CMS told us that it's responding to 
eight recommendations we made in our February 2016 report and 
if executed well and then sustained this represents a major 
opportunity to address the vulnerabilities we identified to 
reduce risk and enhance program integrity.
    Chairman Pitts and Murphy, this concludes my remarks. I 
look forward to the subcommittee's questions. Thank you.
    [The prepared statement of Seto Bagdoyan follows:]
    
    
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    Mr. Pitts. The chair thanks the gentleman. I will begin the 
questioning and recognize myself 5 minutes for that purpose. 
Let me just say in the beginning, GAO has been a great 
government watchdog for taxpayers, and while the undercover 
enrollment testing for the exchanges is thorough and helpful, 
troubling to learn just how bad the vulnerabilities of the ACA 
exchanges remain.
    Mr. Bagdoyan, your testimony offered a preview of your 
agency's findings in this space. Let's examine a few of the 
numbers; talk about the fictitious scenarios. As I understand 
it, this is the first year that coverage eligibility must be 
verified to determine whether an applicant who previously 
received an exchange plan filed federal tax returns; is that 
correct?
    Mr. Bagdoyan. Yes, Mr. Chairman. That's correct.
    Mr. Pitts. The GAO tested fictitious applicants that you 
previously used for plan year 2014. Now of the 15 applicants 
that you attempted to gain coverage for, all 15 were initially 
enrolled in plans. It is my understanding that still today, ten 
of these fictitious applicants are receiving monthly advanced 
premium tax credits, about $1,100 a month, and all ten qualify 
for cost sharing reduction or CSR payments. Are any of these 
ten fictitious enrollees false applicants you used in 2014 who 
never paid federal taxes?
    Mr. Bagdoyan. Four of those, Mr. Chairman, are essentially 
revived identities from our 2014 work.
    Mr. Pitts. Administrator Slavitt, CMS announced that APTC 
and CSR subsidies would be ended for 2016 enrollees who 
received APTCs in 2014 but did not reconcile these payments on 
their federal taxes. In one of these fictitious cases, a 
federal marketplace representative initially told the enrollee 
they were not approved for subsidies.
    But after the fictitious enrollee verbally attested that 
they had filed a return, the representative approved the 
subsidized coverage even though it was a false attestation. Why 
does CMS allow applicants to self-attest to this safeguard 
designed to protect taxpayer funded premium credit?
    Put your mike on.
    Mr. Slavitt. Yes, thank you, Chairman Pitts. And thank you 
to Mr. Bagdoyan for the work that you all have done.
    I think with respect to the people who have, we call them 
people who have failed to reconcile who have received an 
advanced premium tax credit but haven't yet filed, many of 
those in our work with the IRS turn out to be people who are 
filing taxes for the first time. And so what happened is that 
when they came back to get coverage in 2015, if the IRS didn't 
have a file for them that they filed, they were not able to get 
coverage.
    We did allow people to attest if they had an extension or 
if they had filed taxes and they claimed that the IRS hadn't 
received them yet, but that's not where we stop. And I think to 
the heart of your question, we had 19,000 people who so 
attested and many of them have since demonstrated that they 
have paid their taxes. And then as of this month, those that 
have not yet demonstrated that those people will be terminated 
from advanced pay on a tax credit.
    Mr. Pitts. So how many individuals have had their coverage 
ended due to violating this safeguard?
    Mr. Slavitt. As of this month it will be several thousand. 
I don't have the exact figure here with me.
    Mr. Pitts. OK. According to GAO, the IRS expressed concern 
to your agency about this attestation approach, and I also 
point out that a February 2016 report from GAO recommended that 
CMS conduct a risk assessment of potential exchange fraud. Has 
CMS conducted a risk assessment of the application eligibility 
and enrollment process?
    Mr. Slavitt. I'm not entirely sure what you're referring 
to. I do know that the GAO gave us a recommendation earlier to 
create a risk assessment framework through which we assess all 
of the potential risks to the exchanges, and we have indeed 
implemented that and it's actually been extremely helpful to 
us.
    Mr. Pitts. And can you provide the committee with a copy of 
that report?
    Mr. Slavitt. The report from the GAO?
    Mr. Pitts. Yes, the recommendations.
    Mr. Slavitt. The recommendations, sure. We'll get that.
    Mr. Pitts. All right. We now have 3 years of undercover 
testing. The results have not improved, and I know I speak for 
taxpayers across Pennsylvania and our country when I say this 
is frustrating and alarming. I will yield the balance of my 
time to Cathy McMorris Rodgers for her comments.
    Mrs. McMorris Rodgers. In my home in Eastern Washington--
oh, thanks--our state insurance commissioner recently approved 
premium increases for 2017. On average they are increasing by 
over 13 percent. Rate increases like these are being seen 
across the country and they are far from affordable. In my 
state they go from 4.6 percent to 22.75.
    I want to take the moment here just to thank my colleagues 
for their efforts to come up with common sense solutions to 
ensure Americans will have access to high quality and the 
lowest cost possible, and we must respect the sacred 
relationship between the patient and the doctor. Thank you very 
much.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the ranking member of the Health Subcommittee, Mr. 
Green, 5 minutes for questions.
    Mr. Green. Thank you, Mr. Chairman, and thank our witnesses 
for being here today and the work you do. Let me talk a little 
bit about Texas' experience. Under the Affordable Care Act 
millions of Americans are able to access their vital care 
resources in our communities. In my state Texas we realized the 
following benefits.
    During the last enrollment period over 1.3 million 
individuals selected a marketplace plan. Forty eight percent of 
those individuals were new consumers. Unfortunately, 1.2 
million individuals who would otherwise be covered remain 
uninsured because Texas refused to expand the Medicaid. As I 
said earlier, 50,000 of that 1.2 million are my constituents.
    As of 2015, the ACA provided community health centers 
grantees in Texas with over 470 million in funding to offer a 
broad array of primary care, extended hours of operation and 
hire more providers and develop clinical spaces. Medicare 
beneficiaries in Texas have saved more than $971 million on 
prescription drugs because of the Affordable Care Act and the 
closing of the donut hole that was created in 2003 with 
Medicare Part D.
    And I am proud of the progress that we have in our country 
made with the ACA and I couldn't be more pleased with these 
results, but Congress could make it better by stopping the 
dozens of repeal efforts and help provide more health care for 
our constituents. Regardless of whether you supported the ACA 6 
years ago or when it passed into law, it is hard to deny that 
there is historic success.
    Before the Affordable Care Act was passed the insurance 
system was broken. Premiums were increasing rapidly. For 
example, in 2009-2010, according to Kaiser Family Foundation 
survey, the average increase in individual market premiums for 
individuals who were covered more than 1 year was 15 percent. 
Under the pre-ACA system there were no protections for 
consumers, and insurance companies could drop them within any 
time.
    Administrator Slavitt, before the ACA was passed could an 
individual with preexisting condition be charged more for 
insurance than his or her healthy peers?
    Mr. Slavitt. Yes. In most places in the country, yes, 
that's correct.
    Mr. Green. Before the ACA was passed could insurers protect 
their bottom lines by avoiding the sickest and costliest 
patients in the individual market?
    Mr. Slavitt. Yes, in almost every state in the country.
    Mr. Green. Before the ACA was passed was there any 
mechanism for the federal government to review health insurance 
rates to ensure that the rates were reasonable; did consumers 
have any recourse if their premiums went up 20, 30 or 40 
percent?
    Mr. Slavitt. No, not in most places, sir.
    Mr. Green. Was there any out-of-pocket maximum or did 
consumers have to shoulder potentially tens or hundreds of 
millions, hundreds of thousands of dollars due to medical 
emergencies?
    Mr. Slavitt. There was not.
    Mr. Green. Let me give you an example in my last time. When 
I was in business we had a printing company. We had 13 
employees and one of my jobs as the manager of it was to 
negotiate for insurance rates. Small business, 13 employees; we 
could never get one of the top companies to give us bids. But 
we did select coverage because we also had a union contract for 
our line folks so we had to match what the union plan would 
have done, so we negotiated it and we would sign a 3-year 
contract and with renewal opening of the premiums every year.
    Well, in my experience in that every year of that 3-year 
contract, they would come in and offer us, say, well, we need 
20 or 25 percent more. We would negotiate it down. It ended up 
I almost had to negotiate every year with a new company.
    But my experience was with 13 employees one of our carriers 
who had our insurance said, well, we need to raise your 
premiums substantially because one of your employees actually 
had a double mastectomy. And he said, what we would suggest, if 
you keep your group at 12 people and buy a separate plan for 
that 13th employee. And I said, well, I appreciate that option, 
but that particular lady is the owner's wife, and I will be 
glad to share you are willing to put them out on an individual 
market. And believe me, our negotiations got much better.
    That doesn't need to happen today because of the Affordable 
Care Act. And that is why it is successful, and it could be 
more successful if this Congress would do like we have done 
every other piece of legislation that has ever been passed. 
Something gets passed, you wait a few years and see what the 
problems are and you go back in and fix it. But we haven't had 
that opportunity since we have tried to repeal it over the last 
6 years probably 60-something times.
    But if you are looking for perfection in any piece of 
legislation you don't come to Congress. We compromise, we work 
to get things passed, so whatever we pass needs to be looked at 
by new congresses or next congresses to make sure we can fix 
it, but the Affordable Care Act has not been subjected to that 
because of the repeal. I would love to see a plan that would 
actually help expand coverage more than we have done.
    Thank you, Mr. Chairman, and I yield back my time.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the chair of the O&I Subcommittee, Dr. Murphy, 5 
minutes for questions.
    Mr. Murphy. Thank you, Mr. Chairman.
    Mr. Slavitt, first I want to ask, you had mentioned in your 
testimony that premiums have gone down in actuality or they 
have gone, they are less than what CBO estimated?
    Mr. Slavitt. I think what I said is after the second, after 
2016, so current premiums are between 12 and 20 percent lower 
than ingoing estimates. And I can get you the cite for that.
    Mr. Murphy. Than estimates, they are lower than estimates?
    Mr. Slavitt. They're lower than they were estimated to be 
at this time. And I can get you the cite for that.
    Mr. Murphy. Well, I just want to deal with reality not 
estimates, because the CBO is not held in high esteem in terms 
of always being accurate.
    Mr. Slavitt. It wasn't CBO.
    Mr. Murphy. But estimates, have you shared this information 
with Aetna, United and Humana? Because the fact that they 
bailed out of the market saying this is out of control, maybe 
you have a breakthrough for them that all of these companies 
haven't seen.
    It is amazing to me. Health care costs have gone up. I saw 
one Standard & Poor estimate said they have gone up about 69 
percent in the last few years. Insurance premiums have gone up 
so there is adverse selection. People enroll and then they 
disenroll when they are well; co-pays and deductibles are still 
high.
    So I hope you can show us the source of this. I don't want 
estimates. I want hard core data with regard to are premiums 
going up or not. All the data we see is they are going up. In 
the Pittsburgh market they are going up. In other communities 
they are going up. CO-OPs are failing because they can't handle 
the finances.
    So unless something is heavily subsidized or old or a 
problematic health program, the costs are going up and that is 
why people aren't signing up. So it is not a matter of--I just 
want accurate data so we can deal with this, so please get us 
that.
    Let me ask another question. The committee staff report 
that we released yesterday examines how CMS awarded federal tax 
dollars to state-based exchanges. The ACA states that state-
based exchanges were supposed to be self-sustaining by January 
1, 2015, but CMS gave them extensions so that state-based 
exchanges could continue to use federal money.
    So Mr. Slavitt, your staff tells me that currently as of 
September 2016, every state-based exchange is still using 
federal money; is that correct?
    Mr. Slavitt. Yes. So to clarify, no new money has been 
certainly granted after that initial start-up date.
    Mr. Murphy. They are still using federal money?
    Mr. Slavitt. There are states that have no-cost extensions 
which essentially allow them to continue to complete the start-
up activity that they began----
    Mr. Murphy. They are still using federal money. And again I 
say when you talk about premiums being down, the fact that they 
are subsidized is phony, is absolutely phony. How can you have 
a premium going down if you are still subsidizing it, if we are 
still bailing out insurance companies? Premiums aren't going 
down, it is being subsidized.
    So when does CMS think that the federal money is actually 
going to run out? 2017? 2018?
    Mr. Slavitt. For state-based marketplaces?
    Mr. Murphy. Yes. Yes.
    Mr. Slavitt. I think it'll differ by state. I think we can 
get you the schedule of that.
    Mr. Murphy. And that is when we are really going to find 
out what premiums are if we are not bailing them out. When the 
federal money runs out do you think the state-based exchanges 
will be sustainable?
    Mr. Slavitt. Well, I think each state has its own 
calculation. As people are probably aware, Kentucky most 
recently has decided to move off of the state-based platform to 
the federal platform. I wouldn't necessarily say that was for 
reasons that they weren't sustainable, they just chose that 
they'd rather be on the federal platform than the state-based 
platform, and I think that happens for a variety of reasons.
    Mr. Murphy. That is obfuscating here, because these are not 
just things as, hey, let's all get together and let's just 
switch to a different platform. It is because they have been 
financial disasters.
    And let's go to the CO-OPs. You have got 17 closures, one 
closed just this week. HHS OIG issued an audit just a few 
months ago finding that four of the remaining six CO-OPs fell 
below CMS risk-based capital requirements. So do you think all 
the remaining six CO-OPs will survive the next few months to 
enroll individuals for the 2017 plan year?
    Mr. Slavitt. So I think the assessment that the states will 
make and we will make it along with the states is whether or 
not the remaining CO-OPs have sufficient capital to get through 
2017.
    Mr. Murphy. And we have given them $1.8 billion in taxpayer 
loans of the 17 that have failed. So when you say sufficient 
capital we are going to have to give them more sufficient 
capital to help them?
    Mr. Slavitt. No, there is no additional capital. Congress 
has in fact rescinded, I think it was $6 billion of capital 
that was due to the CO-OPs and that's, so part of the capital 
issues that they have. We have given the CO-OPs, in trying to 
level the playing field, more options to raise outside capital, 
and I think several of them may in fact do that.
    Mr. Murphy. Raise outside capital, so that outside capital 
being what? Premiums aren't paying for the plans then. They are 
getting other outside sources to help bolster the plans so it 
is not just shouldered by the people paying on premiums; am I 
correct?
    Mr. Slavitt. It would be the risk-based capital needed to 
support their ability to write business----
    Mr. Murphy. So I go back to my original point. If they have 
risk-based capital coming in, if they have federal subsidies 
coming in, anything you say about premiums going down, first of 
all, I doubt that is true because we are not hearing that from 
constituents. But the second thing is, if you are subsidizing 
it any reduction is false. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from Colorado Ms. DeGette, 5 minutes 
for questions.
    Ms. DeGette. Thank you so much, Mr. Chairman.
    Mr. Bagdoyan, I wanted to clarify about the GAO's 
undercover study that they did here, a few things. As I 
understand it from your statement, there were 15 attempts in 
three states to get into the system; is that right? It wasn't 
actually 15 people, it was 15 attempts by the GAO fake shoppers 
to do this; is that right?
    Mr. Bagdoyan. These are essentially----
    Ms. DeGette. Yes or no will work.
    Mr. Bagdoyan. No, that's not true.
    Ms. DeGette. Fifteen attempts in three--OK, what was it 
then?
    Mr. Bagdoyan. It's 15 individuals attempting.
    Ms. DeGette. Fifteen separate individuals?
    Mr. Bagdoyan. Yes, ma'am.
    Ms. DeGette. I thought there was one individual that tried 
in three states, no?
    Mr. Bagdoyan. That was to test identity theft and----
    Ms. DeGette. I see, OK. But it was 15 individuals in three 
states then.
    Mr. Bagdoyan. Correct.
    Ms. DeGette. OK. Now these were the fake shoppers, these 
weren't actual consumers. These were people who were getting in 
to try to see if they could do this, right?
    Mr. Bagdoyan. Yes, these are fictitious people.
    Ms. DeGette. Thank you. Now in these type of schemes that 
the report discusses, these 15 fake shoppers, they pay their 
premiums but then they don't get any health care benefits; is 
that right?
    Mr. Bagdoyan. That's correct.
    Ms. DeGette. And in fact they didn't try to get any health 
care benefits. They just wanted to see if they could get the 
premium rebate.
    Mr. Bagdoyan. That's correct, yes.
    Ms. DeGette. Now, so I guess I am a little unclear about 
why somebody would do this in real life, if they pay the 
premium and then not try to get health care insurance. So I 
guess I wanted to ask you, do you know of any actual cases of 
real people who did this?
    Mr. Bagdoyan. I do not.
    Ms. DeGette. So you are not aware of any widespread fraud 
of actual people trying to do this, you just know it could be 
done theoretically?
    Mr. Bagdoyan. We know it could be done based on----
    Ms. DeGette. Thank you.
    Mr. Bagdoyan [continuing]. The vulnerabilities of----
    Ms. DeGette. Now I want to ask you something else because I 
am really supportive of efforts to root out fraud in the 
system, but I don't really understand how this is a useful 
exercise in the real world to see if someone could pay a 
premium, get a tax credit, and then not try to get insurance. I 
don't think that would happen in the real world, and so what I 
am wondering about is why this is useful.
    But I want to ask about something else, and that is about 
this GAO report that was released by your agency on Monday. We 
are handing you a copy of that right now.
    Mr. Bagdoyan. Thank you.
    Ms. DeGette. What this report did is it looked at 
enrollees' experiences during the first year of the ACA 
exchanges and it collected consumer satisfaction information. 
It is entitled and I am quoting--you can see it.
    Mr. Bagdoyan. Yes.
    Ms. DeGette. Most enrollees reported satisfaction with 
their health plans, although some concerns exist. Do you have 
that?
    Mr. Bagdoyan. Yes, I do.
    Ms. DeGette. Are you familiar with that report, sir?
    Mr. Bagdoyan. Yes, I am.
    Ms. DeGette. Oh, you are familiar. So then you know that 
the main finding of the report is, ``most qualified health plan 
enrollees who obtain their coverage through the exchanges 
reported overall satisfaction with their plans.'' Is that 
correct?
     Mr. Bagdoyan. That's correct, yes.
    Ms. DeGette. Thanks.
    Mr. Chairman, I would like to enter this report into the 
record.
    Mr. Pitts. Without objection, so ordered. \1\
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    \1\ The information has been retained in committee files and is 
also available at http://docs.house.gov/meetings/IF/IF02/20160914/
105306/HHRG-114-IF02-20160914-SD003.pdf.
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    Ms. DeGette. Thank you. Now there is another piece of 
evidence that shows what exactly we are trying to do here. We 
have one GAO report that shows 15 people, fake shoppers in 
three states trying to do something that no real person would 
do in real life, and then we have reports from the same agency 
on the same day about enrollee satisfaction taken from large 
national surveys.
    But that is not the subject of this hearing today, only the 
other thing that is not likely to happen in real life. And so I 
just think we have to keep the record clear and we also again 
have to focus as we move forward on fixing the ACA.
    I just want to ask you, Administrator Slavitt, a question 
about this new report about the census and the CDC data that 
both show that uninsured rates are at historic lows. The census 
showed that the uninsured rate fell to 9.1 percent in 2015 down 
from 13.3 percent in 2013; is that correct?
    Mr. Slavitt. Yes, that's correct.
    Ms. DeGette. Now the CDC data showed a drop in the 
uninsured rate to 8.6 percent down from 16 percent in 2010; is 
that correct?
    Mr. Slavitt. That's correct.
    Ms. DeGette. And so it really shows that there are now 20 
million Americans who have health insurance because of the 
ACA's various coverage provisions; is that accurate?
    Mr. Slavitt. Yes that is.
    Ms. DeGette. Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes 
for questions.
    Mr. Shimkus. Thank you, Mr. Chairman. Welcome to our 
witnesses. And, you know, this is just a contentious issue and 
facts are important and data, and customer satisfaction viewed 
by our constituents is what drives a lot of this.
    Mr. Slavitt, under the Affordable Care Act if you like your 
health care plan will you be able to keep it? Yes or no.
    Mr. Slavitt. If it continues to be offered, yes. If not, 
then you'd switch to, shop and find a different plan.
    Mr. Shimkus. OK, so no, you can't if the plan that you had 
prior to the Affordable Care Act is no longer available to 
Americans.
    Mr. Slavitt. The plans available since the Affordable Care 
Act are at much better benefits than prior to the Affordable 
Care Act.
    Mr. Shimkus. Let me ask the second question. If you like 
your doctor you will be able to keep it with no changes prior 
to the Affordable Care Act and now no.
    Mr. Slavitt. I think it's always been true that physicians 
and health plans continually change their relationships----
    Mr. Shimkus. There are limited provider networks or you 
will pay extra, so that is no longer true. Are premiums lowered 
by $2,500 for a family of four?
    Mr. Slavitt. I think if you are referring to the----
    Mr. Shimkus. The promise by the President when he 
campaigned for this----
    Mr. Slavitt. I believe that analysis is that it's lower 
than it would have otherwise been if it continued to grow.
    Mr. Shimkus. OK, then the answer is really no, premiums 
have increased. They haven't decreased. The promise was 
premiums on average would decrease by $2,500 per family. 
Obviously premiums have gone up. The other promise was 80 or 90 
percent of all Americans, the insurance will be stronger, 
better, and more secure. Do you think that is true?
    Mr. Slavitt. Yes.
    Mr. Shimkus. Well, let me read you two notes from 
constituents of mine who obviously are living it. And these are 
follow-ups from meetings I had with the August break.
    Before this terrible bill I paid $78 a month for my child 
health care coverage premium and had a good plan. I now pay 
$167.44 a month and have a much worse plan with high out-of-
pocket cost. He recently got tubes in his ears, a common 
procedure, and it cost us over $5,000. That is why this is real 
to us and that is why we continue to have problems with the 
Affordable Care Act.
    Another constituent wrote--he is a retired senior, doesn't 
qualify for Medicare yet. My wife and I pay a hundred percent 
of the premium cost for the Bronze plan we purchased through 
healthcare.gov. We had a Silver plan in 2015, but the cost of 
the plan increased roughly $400 a month--that is a premium 
increase--so we downshifted.
    Although retired, we do not yet qualify for Medicare and 
our investment income is too high to qualify us for subsidy 
assistance. On the surface that would seem to be a good thing, 
but we aren't that far above the income cutoff and without a 
subsidy assistance these premiums are taking a large percentage 
of our income and it is getting worse over time.
    In 2015, we paid $14,000, almost 15, 14.9, which was 22 
percent of our adjusted gross income. This year our premiums 
will total $15,369 which what I estimate to be about 23 percent 
of our income. We understand that our 2017 insurance companies 
in Illinois are requesting premium increases of about 30 
percent. That would amount to a total annual premium of 
$19,980.32 for our Blue Cross Bronze plan that will be almost 
30 percent of our income for premiums alone.
    So following up on the comments of my colleagues, we have a 
challenge and the premiums are up. And if you make the 
statement that the premiums are not up, then you disregard the 
fact that copays and deductibles are way up. So you keep siloed 
in premiums, premiums are going up that is not disputable, but 
you don't talk about the deductibles and you don't talk about 
the copays which are making it unaffordable for average income 
Americans under this health care plan and this health care 
policy.
    Mr. Slavitt, what do you consider to be a competitive 
market? What is your definition of competition?
    Mr. Slavitt. So I grew up in Illinois.
    Mr. Shimkus. And to think about Illinois----
    Mr. Slavitt. Yes.
    Mr. Shimkus [continuing]. That is a good point, because 
before the Affordable Care Act we did not have a state public 
utility commissioner that set rates for health insurance. It 
was only after the Affordable Care Act. And we had a very 
robust, competitive market which we were proud about because 
our health insurance was driven by competition on price and 
quality without intervention of a government bureaucrat trying 
to dictate the terms of the negotiated agreement between a 
buyer and a seller. Go ahead.
    Mr. Slavitt. Here's what I could tell you. The uninsured 
rate in Illinois has dropped from about 15 1A\1/2\ percent to 
about 8.7 percent. I think that's great news for the state.
    Mr. Shimkus. Are you disputing these numbers of my 
constituents that I mentioned in their stories?
    Mr. Slavitt. Absolutely not.
    Mr. Shimkus. OK, I yield back my time.
    Mr. Pitts. The chair thanks the gentleman. I now recognize 
the ranking member of the full committee, Mr. Pallone, 5 
minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman. I want to ask my 
questions of Mr. Slavitt, but I have to say I continue to be 
amazed by Republican attempts to suggest that things were 
better before the ACA. I mean, it is clearly not the case.
    Despite endless attempts by Republicans to repeal, 
undermine, and defund the law, the Affordable Care Act is 
making health coverage a reality for many Americans who didn't 
have coverage before. Census data released yesterday found that 
the uninsured rate was at 9.1 percent in 2015, down from 16 
percent in 2010, and according to recent CDC data the uninsured 
rate had dropped to a historic low of 8.6 percent in the first 
quarter of 2016. For the first time more than 90 percent of all 
Americans have health insurance and that is without the 
expansion of Medicaid in states like Texas mentioned by our 
ranking member Mr. Green.
    So Administrator Slavitt, can you put this reduction in the 
uninsured rate in historical perspective? How significant is 
this drop, and can you comment on how the different coverage 
provisions of the ACA have operated together to result in these 
gains in insurance coverage?
    Mr. Slavitt. Certainly, and thank you for the question. My 
entire career, which was in the private sector, had not seen 
any meaningful reduction in the uninsured rate, so seeing the 
kind of numbers you talk about occur are incredibly gratifying 
and I think a sign of progress. And as you say we have more 
progress to make. There are still millions of people who live 
in states that haven't chosen to expand Medicaid, and if they 
did the uninsured rate would be even lower.
    Mr. Pallone. Well, let me ask you this. I don't think there 
is any question that we have made great progress in providing 
coverage for individuals who were previously uninsured, but as 
the number of uninsured shrinks the remaining individuals who 
are eligible may be harder to reach. And it is incredible to me 
how many people still are not aware of the fact that they can 
go on the exchange and they have subsidies.
    Most people aren't going to believe this, but within the 
last 6 months I had one of my constituents come up to me and 
say, and ask me when the federal government was going to make 
available health insurance to those who don't get it through 
their job. And I was like, well, we have the Affordable Care 
Act. You know, you can go on this exchange and you are eligible 
for a subsidy, because they gave me their information. And this 
was less than 6 months ago. It is just incredible.
    So according to some experts, many of the remaining 
uninsured are actually still unaware or confused about how 
federal subsidies are available to help them purchase 
insurance. So could you tell me, how is CMS recalibrating its 
outreach in enrollment strategy in order to communicate with 
these harder to reach populations?
    And also, am I correct in stating that more than 80 percent 
of individual market consumers were eligible for tax credits as 
are the majority of the remaining uninsured? So what is CMS 
doing to communicate with these individuals that there is a 
marketplace that they can get a subsidy?
    Mr. Slavitt. So you're exactly right. There are still 
several million individuals in this country who are eligible 
for health insurance, many of them, in fact most of them below 
$75 a month in premium and are still not aware. So we are 
extremely excited about open enrollment for this upcoming 
enrollment season that begins November 1st, and have a 
significant effort to make sure we figure out how to reach 
these new people and educate them.
    A lot of it really requires in-person assistance. Health 
insurance, particularly if you've never had it is very 
complicated and people are sometimes intimidated by it. But we 
do find as I have noted earlier that once people are covered 
their satisfaction is high and they can start to afford their 
prescription medicines. So really, we need to enlist people at 
the local level continually and we're going to do that at this 
open enrollment.
    Mr. Pallone. I don't know. I don't want to put words in one 
of my GOP colleague's mouth, but I think it was Mr. Murphy who 
said something about reducing the amount of money that was 
available for state exchanges. And I don't know if it is the 
same thing. Maybe that is not the pot of money that they use 
for outreach.
    But it disturbs me because I don't want to see the GOP 
efforts to say, look, we have got to cut back on this or cut 
back on that, reduce the money for outreach. But you do have 
that money available, right? That is not going to run out, the 
money that you use for this kind of outreach?
    Mr. Slavitt. That's right. And that is indeed what I think 
states who run their own exchanges are accountable for.
    Mr. Pallone. And so they will continue to have that money 
available for some in the foreseeable?
    Mr. Slavitt. That's right. They charge user fees typically 
or have other appropriations and they use it for that purpose. 
More is better.
    Mr. Pallone. Thank you very much.
    Mr. Slavitt. Thank you.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from West Virginia, Mr. McKinley, 5 
minutes for questions.
    Mr. McKinley. Thank you, Mr. Chairman. I think I am going 
to address my remarks primarily to Mr. Slavitt, if I could, 
please. Last fall I asked you if you could get back to us on 
why the premiums are so high in West Virginia. We have the 
seventh highest premium rate in the country. We have not heard 
back from you since last fall, almost a year ago. We are still 
waiting for that call about it, because we only have one 
exchange in the state and we have seen the premium increases 
logarithmically continue to increase.
    So I need that answer. I am expecting that answer. But I am 
also saying that look, this past year we had a 24 percent hike 
in our premiums and now they are--excuse me. That is what we 
had was 24, then this year there was approval of 32 percent 
increase. And this coming year we have had a small group trying 
to penetrate to give a second option to West Virginia and they 
are asking for a 49.8 percent increase, and from what we 
understand they are likely going to get it.
    So my question in part to you is what is the incentive for 
the regulators in West Virginia or any other state to hold down 
premium increases if we are going to be subsidizing so many of 
them?
    Mr. Slavitt. So thank you. I'd say on the one hand that the 
great news in West Virginia is that the uninsured rate has 
dropped from about 17 percent to about 7 1A\1/2\ percent. On 
the other hand as you point out, we are concerned with the cost 
of health care particularly in rural America. It has always 
been the case. This is not an ACA phenomenon. The lack of 
competition in some parts of the country are areas that we need 
to address.
    I think that some of the protections in the ACA do help 
speak to the issue you raise. So for example, if an insurance 
company were to charge too much they're obligated to give back 
in rebates to the consumers.
    Mr. McKinley. I don't know how that ultimately breaks down, 
if I could. I don't know how that breaks down, because they are 
continuing to make these hikes and I don't think there is an 
incentive for the regulators to hold that down, especially if 
they are going to grant an increase of 50 percent hike with it.
    Let me give you an example and maybe you can work my way 
through this, because it is going to work out she is going to 
have to have a subsidy again which falls back into why keep the 
premiums down if you are going to give them a subsidy. A 60 
year old lady who is working, her husband just lost his job, 
and she was covered under his insurance policy. She was covered 
under his, so now she doesn't have insurance coverage. And in 
the past what she would have done--wait, she is 62. He is 
retired and he went on Medicare. She doesn't have coverage.
    When we spoke to her she said, I would have gotten 
catastrophic coverage but I can't do that. I am not permitted 
to under the ACA, so now I have to go out and buy coverage. And 
it is going to cost her. The cheapest rate she could get was 
$800. That means it is $9,600 a year she is going to have to 
pay. But then I guess what you are going to say, you are going 
to step in and say, well, we are going to provide her premium. 
We are going to give her a subsidy to this; is that correct?
    Mr. Slavitt. What I'd say is I don't know this particular 
situation, glad to look into it. But I would say that for most 
people in America who are in that situation they just prior to 
the ACA weren't guaranteed access to insurance, particularly if 
they were one of the 129 million Americans who had a 
preexisting condition. So we think that's a really critical 
advance. We know that costs matter. We think the subsidies are 
important. We think the subsidies are a critical part of the 
law.
    Mr. McKinley. I appreciate it. I hope that we can do 
something, because at $10,000 a year that is after taxes, how 
much she would be dedicating her income in that what she is 
making it is not a lot of money. But let me switch horses 
entirely on the thing--and I hope that you can get back to me 
on this other matter because you haven't the first time--but, 
and that is that we are site-neutral.
    We have got a hospital complex in West Virginia that has 
been trying to get a permit for numbers of years. It took them 
several years to get this permit to build an ancillary hospital 
facility nearby. And as a result of being held up because of 
the government for water permits and road permits, 
environmental permits, it didn't occur until after November of 
2015.
    And now as a result of that by virtue of them now having 
invested $30 million into this under the site-neutral plan they 
will lose $4 1A\1/2\ million of revenue for that hospital. I am 
asking if you can get back to us or have a conversation with us 
about how much more flexibility we can have to go beyond that 
because it was not of their doing. This was an arbitrary date 
of November of 2015 that was established.
    And I really would like to hear this because it is going to 
have an impact. That $4 1A\1/2\ million it is going to cost, it 
is going to be borne by somebody else. And that is once again 
in rural America what it is going to impact is where we have 
the cost shifting, and it doesn't have to happen if we could 
just have a little flexibility in dealing with that site-
neutral deadline date. Can you get back to me?
    Mr. Slavitt. Yes. And I think as you're aware we're in the 
middle of a rulemaking process, so glad to get back to you and 
listen to comments, and particularly in this particular 
hospital situation make sure we understand all the details. So 
yes, we'll get back to you.
    Mr. McKinley. Very soon. Thank you very much. I appreciate 
it and yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from California, Ms. Matsui, 5 
minutes for questions.
    Ms. Matsui. Thank you, Mr. Chairman. I want to thank the 
witnesses for being here today. I have some few facts from 
California. The Affordable Care Act makes significant 
investments to improve the health of our nation and for 
Californians. I would like to highlight a few of these 
benefits.
    Since last November over 1.5 million individuals in 
California have gained coverage through the health insurance 
marketplace. Because of the ACA there are 78,000 children in 
California that cannot be denied health coverage because of 
preexisting health condition. Between 2013 and 2014, the 
uninsured rate in California dropped by over 6 percentage 
points from 21.6 percent in 2014 to 15.3 percent in 2013.
    And as the CDC reported last week, the national insurance 
rate is now at a historic low. Under the ACA health insurance 
companies must spend at least 80 percent of premium dollars on 
health care or improvement to care as opposed to administrative 
costs like salaries or marketing or they have to issue a 
refund. As of 2015, more than 490,000 Californians with private 
insurance coverage benefited for more than $11 million in 
refunds.
    The Affordable Care Act is doing great things in California 
and I am proud to see that. We see how Medicaid expansion has 
helped to bring the uninsured rate to its current historic low. 
Gallup data from earlier this year found that seven of the ten 
states with the largest reductions in uninsured rates were 
Medicaid expansion states. Gallup also found that states that 
have not expanded Medicaid were less likely to see improvement 
in their uninsured rates compared to states that have expanded 
coverage.
    Unfortunately we are seeing a widening gap in the uninsured 
rates between expansion states and non-expansion states. 
Administrator Slavitt, do you expect that trend will continue 
in the states that continue to choose not to expand Medicaid?
    Mr. Slavitt. Yes, I do.
    Ms. Matsui. Administrator Slavitt, if all states chose to 
expand Medicaid do you imagine that we will see the uninsured 
rate drop even lower than where it is now?
    Mr. Slavitt. Yes, I think there's three to four million 
people easily that would be covered.
    Ms. Matsui. Thank you. We also know there are many other 
benefits to expanding Medicaid. For example, premiums on the 
individual insurance market on average 7 percent lower in 
states that have expanded Medicaid. I am hopeful that we can 
see the uninsured rate continue to drop and I hope more states 
do right by their citizens by choosing to expand Medicaid.
    Now every time one provision of the ACA has a bump in the 
road we hear from our Republican colleagues that this is the 
end of health reform. But the fact is that the law is 
confirming benefits on millions of Americans across the country 
and it is important to put these issues in context.
    Administrator Slavitt, we have heard that 2017 is a 
transition year for the marketplace. Why might we be seeing 
higher premium increases in 2017 than we saw in previous years?
    Mr. Slavitt. So I think there's two principal reasons and 
both of them I think are one-time effects. The first is that 
the law created a 3-year reinsurance pool that expires this 
year, so by definition that will increase premiums pretty 
meaningfully. Secondly, it's a fact that in the first couple 
years of the exchange the insurers priced without having data 
on what the claims costs would be. They now have that data.
    I think in many cases in many states they've found that 
they've priced too low and I think are asking for and receiving 
some justifiable rate increases. But again the good news is 
medical cost trends across the country are very low, so once 
these one-time effects kick in, I think our expectation is that 
we will see a very normalized continued low rate of growth.
    Ms. Matsui. Now as the insurance market adjusts, the ACA 
has other measures in place like tax credits to keep premium 
affordable and provide choices for consumers. My understanding 
is that the majority of current marketplace consumers, in fact, 
benefit from these financial assistance measures.
    Administrator Slavitt, how will these mechanisms including 
tax credits and the opportunity to shop around for different 
plans help consumers find affordable coverage as the market 
stabilizes?
    Mr. Slavitt. I think when consumers learn that the vast 
majority of them are able to purchase coverage for $75 a month 
or less in premiums, it is absolutely astounding to them given 
the amount of financial security and health security that 
they've never been able to obtain before in their lives have 
had. So we think during the fourth open enrollment we're really 
eager for people who haven't yet heard about the marketplace 
and understand those benefits to come back.
    Ms. Matsui. Oh, I thank you and I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from Virginia, Mr. Griffith, 5 minutes 
for questions.
    Mr. Griffith. Thank you, Mr. Chairman.
    Administrator Slavitt, on Friday last, CMS issued a five 
paragraph memo on risk corridor payments for 2015. Several 
insurance companies are suing the Administration over 2014 
payments because they only collected 12.6 percent of what the 
industry requested to be made whole. In the last paragraph of 
the memo, your agency wrote, and I quote, as in all cases where 
there is a litigation risk, we are open to discussing 
resolution of those claims. We are willing to begin such 
discussions at any time, end quote.
    Does CMS take the position that insurance plans are 
entitled to be made whole on risk corridor payments even though 
there is no appropriation to do so, yes or no?
    Mr. Slavitt. I think what we've always said is that the 
risk corridor payments are an obligation of the federal 
government and I think that----
    Mr. Griffith. Yes or no?
    Mr. Slavitt. I think that statement's just standard 
practice.
    Mr. Griffith. So it is yes?
    Mr. Slavitt. I'm sorry. Can you rephrase the question for 
me and I will----
    Mr. Griffith. I will restate it. Does CMS take the position 
that insurance plans are entitled to be made whole on risk 
corridor payments even though there is no appropriation to do 
so? And I took your answer as a yes; am I correct?
    Mr. Slavitt. Yes. It is an obligation of the federal 
government.
    Mr. Griffith. So it is a yes? Just waiting to hear you say 
yes.
    Mr. Slavitt. If that's how you interpret that. Yes, sure.
    Mr. Griffith. Seriously? All right. Do you intend to use 
the judgment fund to make the risk corridor payments to 
insurance plans? Yes or no?
    Mr. Slavitt. I would say that further questions are--I 
would not be comfortable commenting on any current legal 
proceedings and I'd prefer to----
    Mr. Griffith. You did an invitation to settlement. There is 
no appropriation for the funds. Are you intending to use the 
judgment fund, yes or no?
    Mr. Slavitt. Again this is a case before Justice and so I'd 
be more comfortable not talking publicly about that.
    Mr. Griffith. So what you are saying is is that you have 
turned this over to Justice and you have talked to the Justice 
Department about the various suits?
    Mr. Slavitt. I personally have not.
    Mr. Griffith. You have not. Can you get me the names by the 
16th of September, because this is time-sensitive. Can you get 
me the names of those people that have spoken with Justice 
about this matter?
    Mr. Slavitt. Sure.
    Mr. Griffith. Thank you. I appreciate that. Now which 
insurance plans are suing or have indicated they intend to sue 
CMS or the United States in relationship to the risk corridor 
payments?
    Mr. Slavitt. I don't have a list with me, so I can get that 
to you.
    Mr. Griffith. And again because it is time sensitive can 
you get me a list by September 16th?
    Mr. Slavitt. Absolutely.
    Mr. Griffith. I appreciate that very much. Now you 
indicated you haven't spoken to Justice, but do you know of 
anyone in your Department that has discussed settlement plans 
with the Department of Justice?
    Mr. Slavitt. I know that our general counsel speaks to 
Justice regularly, so I assume that they have but I don't know 
any detail.
    Mr. Griffith. Well, I am assuming that you authorized the 
memo that I quoted earlier where you created an invitation to 
settle. I would assume that you know that there were some 
discussions with Justice prior to making an invitation to 
settle with these companies; is that not correct?
    Mr. Slavitt. That's correct.
    Mr. Griffith. That is correct. So there have been 
discussions by somebody with Justice about how you are going to 
settle and you don't know where the money is going to come 
from, but you assume somewhere it will come from.
    Mr. Slavitt. Yes. They're representing us so we in fact 
have talked to them. Yes.
    Mr. Griffith. All right. I am curious. Have you had any 
conversations about the lawsuits with your predecessor who is 
now a top representative for the insurance industry about the 
risk corridor situation? Yes or no.
    Mr. Slavitt. No.
    Mr. Griffith. And prior to issuing the memo, and I touched 
on this briefly but I want to make sure I am clear. Prior to 
issuing the memo, did Justice Department approve the memo that 
you released on Friday which had an invitation in the last part 
of it to settle the lawsuits?
    Mr. Slavitt. I believe they reviewed the language, yes.
    Mr. Griffith. All right. And has CMS spoken with any 
insurance plan directly or indirectly about settlement of the 
risk corridor lawsuits? Yes or no.
    Mr. Slavitt. CMS has had inquiries from insurance companies 
which we've then referred over to Justice.
    Mr. Griffith. And do you remember which insurance companies 
they were?
    Mr. Slavitt. I can get you that.
    Mr. Griffith. If you can get me that by September 16th I 
would greatly appreciate it----
    Mr. Slavitt. OK.
    Mr. Griffith [continuing]. Because it is a time-sensitive 
matter, as you can imagine.
    Mr. Slavitt. OK.
    Mr. Griffith. I do appreciate that. With the last few 
seconds that I have I am going to switch gears a little bit. 
And I have heard a lot of folks talk about the uninsured. One 
of the problems that I am having when I get my complaints in my 
district about Obamacare is underinsured; that with the copays 
and the deductibles and in order to afford the insurance 
because the rates have gone up, my folks are having to pay high 
deductibles.
    They in essence don't have significant enough insurance, 
and when a catastrophic illness or injury occurs they are 
finding that they are having to sell off assets that they have 
had to work for for years including homes, et cetera. And I am 
just wondering, does anybody keep numbers on those who I would 
call the underinsured? They may have a plan but not one that 
keeps them from being financially crippled should they have a 
catastrophic illness or injury.
    Mr. Slavitt. Yes. The most recent numbers that I've seen 
despite the headlines show that in 2015 on the exchange the 
median deductible was $850, which was a decrease from the prior 
year where it was $900.
     Mr. Griffith. And all I can say, Administrator Slavitt, to 
that is that when folks come up to me at the New River Valley 
Fair, who are average hardworking folks in a relatively poor 
district, that is not what they are telling me. My time is up. 
I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Kentucky, Mr. Yarmuth, 5 minutes 
for questions.
    Mr. Yarmuth. Thank you very much, Mr. Chairman. I thank the 
witnesses for appearing. This does sound a lot like the movie 
Groundhog Day. We have been through all of these arguments 
before and it becomes very frustrating. This hearing has a new 
title, The Affordable Care Act on Shaky Ground, and I would 
submit that if it is on shaky ground it is because Republicans 
both in Congress and across the country where they have the 
authority are planting dynamite in the ground under the system.
    And I think that is why all of my colleagues have talked 
about the fact that we continue to ignore the incredible 
progress that has been made under the Affordable Care Act, not 
only the number of people who have been insured who were 
previously uninsured but also the people who have been 
protected now against significant financial loss or even 
unnecessary debt because they have coverage.
    I want to talk about my state though. And in the chairman's 
report, the CMS's regulation of exchanges and so forth, it 
makes some statements about Kentucky's exchange that I think 
dramatically mischaracterized what has gone on there. The last 
time you were here I asked you a question because I knew our 
new governor at that time had promised to dismantle Kynect, our 
state exchange, during his campaign. And I asked you if you 
could think of any way in which any Kentucky resident would be 
better off on the federal exchange than the state exchange, and 
you answered you couldn't; is that correct?
    Mr. Slavitt. That's right.
    Mr. Yarmuth. That is right. Do you think that anything 
happened in Kentucky between that answer and the time that 
Governor Bevin actually submitted his request or notification 
to you that he was going to disconnect Kynect to make that 
different?
    Mr. Slavitt. Not to my knowledge.
    Mr. Yarmuth. And in fact, the reason he did that was not 
because of any reason that made sense either economically or in 
terms of providing service for our citizens, but because he has 
an ideological opposition to Kynect and promised to do it 
during the campaign. You don't have to answer that; that is my 
characterization.
    But now what he is doing is even worse, because while we 
had the most successful change, arguably, in the country that 
he has basically dismantled, we also have one of the most 
dramatic increases in, or reductions in uninsured because of 
expanded Medicaid. More than 400,000 Kentuckians now have 
coverage who didn't have it before.
    And what Governor Bevin has done now is made a proposal for 
a waiver to change a lot of the Medicaid system in Kentucky. He 
has made a proposal to CMS which he counseled with you before, 
you and your staff, before he made the proposal in which you 
told him what might be acceptable and what might not be 
acceptable under the proposal; is that not correct?
    Mr. Slavitt. We did have a dialogue, yes.
    Mr. Yarmuth. And in spite of that he has submitted a 
proposal to you which I think according to the law you are 
almost obligated to reject. On Page 15 of that proposal he says 
if this demonstration project is not approved I will dismantle 
Kynect. I will dismantle the Medicaid expansion in my state.
    So what he is doing is setting up for you to reject the 
proposal and then he is going to dismantle Medicaid expansion 
in Kentucky, take insurance away from 400,000 of our citizens, 
jeopardize many providers who are now being compensated for the 
care they provide, and he is doing it again for ideological 
reasons.
    So the point I want to make is that yes, there are a lot of 
problems and a lot of things going on in this state, in this 
country right now that may call into question the Affordable 
Care Act. But the things that are going wrong are things that 
Republicans are doing to sabotage the functioning of the act, 
the law.
    And that is why we are so frustrated that instead of 
offering suggestions to improve the ACA--which we could in 
many, many ways; we all agree on that--the Republicans in 
Congress again hold hearings like this, vote time and time 
again, more than 60 times to repeal the ACA, and have never 
proposed an alternative that is anything but going back to 
where we were before the ACA when insurance companies 
controlled the system.
    They want to throw it back in the private system. That is 
what Matt Bevin says he wants to do in Kentucky as if that is 
some noble objective. And the reason that they have not 
proposed a viable alternative to the ACA other than going back 
to the pre-ACA situation, I am convinced, is because the only 
other alternative is single payer. And if you listen to 
virtually every complaint that is raised during this hearing 
today and then every other hearing, those complaints would not 
exist under a single payer system.
    Now I don't think anybody is ready to go there right now. 
We are going to end up there eventually, but I think we ought 
to start being honest with the American people about what the 
options are available to them and how important the ACA's 
success is to them as well. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Missouri, Mr. Long, 5 minutes for 
questions.
    Mr. Long. Thank you, Mr. Chairman. And Mr. Slavitt, is it 
true that the current CEO of the federal exchange 
healthcare.gov is Kevin Counihan?
    Mr. Slavitt. Yes, sir.
    Mr. Long. It is also my understanding and I am sure you are 
aware that he was invited to testify here today but did not 
come. Do you know why he is not here?
    Mr. Slavitt. He's on travel today, sir.
    Mr. Long. I am sorry?
    Mr. Slavitt. He's traveling today, sir. I believe he's in 
South Carolina.
    Mr. Long. South Carolina.
    Mr. Slavitt. That's my understanding.
    Mr. Long. OK. Do you have any idea of where he was back on 
the September 6th or 7th, whenever Arizona, the same day that 
Arizona's Blue Cross Blue Shield mysteriously decided to sell 
plans in Pinal County? Do you know if he would have been in 
Arizona at that time?
    Mr. Slavitt. I don't know his schedule on September 6th or 
7th.
    Mr. Long. OK. Can you tell me if Mr. Counihan has had 
conversations with Blue Cross Blue Shield of Arizona or 
Connecticut after the deadline to sell plans on the federal 
exchange?
    Mr. Slavitt. I don't know the timing, but I'm sure he's had 
conversations with most of the major health plans.
    Mr. Long. What was the first part of your answer? I am 
sorry. I couldn't hear you.
    Mr. Slavitt. I can't tell you the dates, but I'm sure he's 
had conversations with many of the major health plans.
    Mr. Long. But you don't know whether or not he has had 
conversations after the deadline?
    Mr. Slavitt. I don't have any knowledge of the dates he's 
had conversations.
    Mr. Long. OK. Have you yourself had conversations with Blue 
Cross Blue Shield of Arizona or Connecticut Care after the 
deadline to sell plans on the federal exchange?
    Mr. Slavitt. No.
    Mr. Long. No negotiations after the deadline is passed?
    Mr. Slavitt. I have not.
    Mr. Long. OK. Is it fair to say that both carriers were 
allowed to sell plans after your own deadline?
    Mr. Slavitt. I'm not sure. I don't know.
    Mr. Long. You are not sure that Pinal County was offering 
to sell plans?
    Mr. Slavitt. I'm not sure which deadline you're referring 
to, but I'm happy to investigate and we will then get back to 
you.
    Mr. Long. OK. I would appreciate if you would. So you are 
aware or not aware that deadlines have been passed and then 
plans were offered after these deadlines passed; you are aware 
of that or not aware of that?
    Mr. Slavitt. Well, I'd have to understand what deadlines 
you're talking about. I mean, we certainly give----
    Mr. Long. Sell the plans, but----
    Mr. Slavitt. We certainly give states dates in which we'd 
like to receive things. Sometimes if we don't receive them on 
those dates I'm sure that we extend those deadlines, but I 
don't know that in this particular situation that that's 
occurred. But that certainly wouldn't be absolutely out of the 
question.
    Mr. Long. OK. But do you have any idea why there would be 
deadlines if the deadlines are not followed?
    Mr. Slavitt. Well, yes. Typically our team has to do work 
like loading plans and loading data and they like to have 
enough time to do that and do it right. But certainly we're 
going to always do what's in the best interest of the consumers 
and the Americans in the state to make sure that they have 
coverage options available. So if our team has to work a little 
harder or work over the weekend in order to do that that's the 
kind of dedication that we have on our team.
    Mr. Long. OK, thank you. In my district in August I had the 
opportunity to visit with a large school board there in the 
district, and I was kind of surprised at the end of the meeting 
when the chief financial officer that has been with the school 
district 33 years looked at me and volunteered that she said, I 
was thinking last night if I could ask you to do one thing for 
me as congressman that one thing would be to get rid of 
Obamacare.
    And that honestly shocked me. Two of the more pressing 
problems with the law that she referred to were the 30-hour 
work week and the 26-week break for retired teachers. The 30-
hour work week, also known as employer mandate, requires all 
businesses or organizations with 50 or more employees to 
provide health insurance for their employees who work more than 
30 hours a week.
    This particular school district currently has 921 full-time 
staff. The 26-week break is required for educational 
organizations that are unable to provide health insurance to 
faculty that recently retired. If ignored, the retired teacher 
would be seen as a continuing employee which would require them 
to offer health insurance.
    These are the teachers, the retired teachers that know the 
children in those schools. They know the school, they know the 
system. They know the teachers and they have to take a 26-week 
break because of this law.
    And Mr. Chairman, I write a weekly column called Long's 
Short Report and it just happened that today in our local 
paper, the Gannett paper, the Springfield News-Leader published 
my latest column on this very subject about my trip to the 
school district. So without objection, I would like to offer 
that into the record and I would encourage everyone to read 
that; get more of the details of how this law has affected 
school systems and small businesses.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Long. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from Florida, Ms. Castor, 5 minutes 
for questions.
    Ms. Castor. Well, thank you, Mr. Chairman, and thank you to 
the witnesses for being here today. The progress that we have 
made since the adoption of the Affordable Care Act has been 
very significant. And before we turn to questions I wanted to 
focus on how meaningful it has been to my neighbors back home 
in the state of Florida.
    In Florida we are fortunate. We have a very competitive 
marketplace so families and consumers have a lot of choices. 
They have good affordable options. In fact, it looks like in 
the coming year that 82 percent of marketplace consumers in 
Florida will be able to purchase coverage for less than $75 per 
month.
    During the last open enrollment period, 1.7 million 
Floridians signed up for coverage in the health insurance 
marketplace including over one million women and children. And 
this is important because we have very serious and growing 
concerns in Florida because of the spread of the Zika virus. 
The current Zika infection count in Florida is 800 individuals, 
including 86 pregnant women that we know of, so this is very 
concerning.
     And what is especially troubling now is that Florida 
hasn't expanded Medicaid. So even though we have over 250,000 
women ages 18 to 34 in my state who have gained quality 
affordable coverage in the marketplace, we have got more than 
that that should be covered, could be covered if the state 
expanded Medicaid. So you can see why this is particularly 
troubling at a time of a growing public health crisis.
    But there is a lot of good news too. Over 3.1 million 
seniors are eligible for free preventive health services with 
no deductibles or copays and they are taking advantage of it. 
In 2014 alone, over 346,000 seniors in Florida received 
Medicare Part D prescription drug discounts worth over $306 
million, or on average $884 back into the pockets of 
beneficiaries.
    It is interesting that more than 38 percent or about 
383,000 returning healthcare.gov consumers last year switched 
plans. And this is something that we could work on in a 
bipartisan way. It is very interesting. I guess we knew that 
Americans love to shop and compare and they are doing that. But 
we have got to work together to maintain these competitive 
marketplaces so they have the ability to do that. When they 
switched they saved on average about $34 per year.
    And then for the vast majority, about 60 percent of 
Floridians already have health insurance through their 
employers and I thought it was quite interesting that there the 
insurance premiums in Florida are now growing at the slowest 
rates on record. This is also something we have got to continue 
to analyze and make sure that this is the case overall.
    But I would like to return to the Medicaid expansion 
challenge, because in the state of Florida we have got so many 
that are falling into the gap. And, you know, we know it is 
fiscally irresponsible not to expand Medicaid. We know the most 
important thing we could do for mental health coverage is to 
expand Medicaid.
    But there is a new piece of data that Administrator 
Slavitt, I would like you to address. Medicaid expansion brings 
down marketplace rates. You said it brings down premiums by 7 
percent. Is that just in the marketplace, is that overall and 
what is behind, what is going on in pressure in the 
marketplace?
    Mr. Slavitt. Well, no, that 7 percent is in the 
marketplace, and I think, for everyone here who has an interest 
in helping all of your constituents and all of their concerns 
about affordability that's really one of the top most important 
things that can be done is to eliminate all those places where 
people are uncovered.
    And a lot of those people who don't get coverage through 
Medicaid sometimes find their way onto coverage in the 
marketplace and that drives up costs needlessly. So it's a 
critical priority that we complete the job and expand Medicaid 
wherever we can.
    Ms. Castor. And one of the things that drives a lot of 
businesses and the folks of the Florida Chamber crazy is we are 
sending so much money up to the federal government because 
Medicaid is a state-federal partnership. We are not bringing 
those dollars back and putting them to work creating jobs and 
taking care of people. What happens to those dollars?
    Mr. Slavitt. Well, they certainly go to the states that 
have chosen to expand Medicaid. And I will just add one thing 
for, Congressman Yarmuth raised the question of Kentucky. There 
was a very interesting study in Kentucky a couple years ago 
which, I think, showed that Kentucky saw 40,000 new jobs and 
something to the effect of $30 billion improvement to the state 
economy through 2021 in the expansion of Medicaid. So you can 
imagine the economic benefits on top of which you're already 
talking about are quite large.
    Ms. Castor. Thank you very much.
    Mr. Pitts. The lady yields back. The chair now recognizes 
the gentleman from Indiana, Dr. Bucshon, 5 minutes for 
questions.
    Mr. Bucshon. Thank you, Mr. Slavitt, for being here. This 
is directed at you. On mandates in the Affordable Care Act I 
want to talk about the age rating ratio. Many states are using 
a five-to-one ratio before 2010, meaning the most expensive 
plan can only cost five times more than the least expensive 
plan when it comes to patients' ages.
    In my home state of Indiana we didn't have an age rating 
mandate. The President's plan moved this to three-to-one for 
all states regardless of their unique patient needs. This has 
led to sicker insurance pools and driven younger, healthier 
patients away from the marketplace, in my view. The baseline 
has increased, so the argument that the three-to-one ratio 
saves seniors money may not be true. In fact, I don't think it 
is true. It has just increased costs for younger people.
    So my question would be, is would moving the ratio back to 
five-to-one have an immediate impact on the cost, do you think, 
for many people who would potentially enroll?
    Mr. Slavitt. No, I think this would have to be studied 
based upon two factors. What does it do to the economics or the 
cost and what does it do to the coverage and who benefits and 
who doesn't? So I think it's the kind of proposal that should 
be thoughtfully evaluated. I have not done that.
    Mr. Bucshon. OK. Would moving the ratio back to five-to-one 
attract younger, healthier patients to the plans? And the 
reason I say that is because according to CBO, ``average 
spending among people who are 64 years or older is about 4.8 
times as high as average spending among people who are 21 years 
old.'' That is cost to the health care system. So to me it 
would make sense if you could shift the baseline back and get 
the cost down for younger people, you would get more people 
into the plans and that might help balance the demographics, 
right?
    Mr. Slavitt. Yes. That could be one of the benefits. I 
haven't seen any studies on the topic, but----
    Mr. Bucshon. Well, I would encourage you to look at that 
because I actually have legislation to actually to allow states 
to do that because that is the premise.
    A couple other questions on global surgical payments in 
MACRA, the replacement for the SGR, our language authorized CMS 
to use a representative sample of docs for reporting data on 
10- and 90-day global surgical codes. But the most recent 
physician fee schedule is requiring all docs that perform 
relative procedures to report under the claims analysis 
section. And this is, in my view, not in line with the 
intentions of Congress in MACRA.
     So what we need really is an appropriate representative 
sample. How the data is collected must change. The 10 minute 
reporting increments is, I can tell you as a surgeon--I was a 
surgeon before--is actually, it is impossible. So what I am 
asking for is for CMS to give time to work with surgical 
societies and other stakeholders to determine what is an 
accurate representative sample. This is really important. So 
what I am asking is can you commit, or whoever at CMS is 
responsible for this, to working with my office and other 
stakeholders to work this through?
    Mr. Slavitt. Absolutely. As you can imagine we've gotten a 
lot of feedback on this proposal. It's a proposal that I think 
we're still working through the comment period. But we 
absolutely need that input and we are committed to coming out 
with a final rule which does get that right.
    Mr. Bucshon. Well, that is really important because what we 
want is accurate data, right? At the end of the day we want 
accurate data.
    Mr. Slavitt. Right.
    Mr. Bucshon. One final question on the proposed rule for 
Medicare Part B model, I am very concerned by statements from 
the physician community that practices may be forced to send 
patients to hospitals to receive care, particularly oncologists 
particularly because hospital-based care can be more costly for 
beneficiaries.
    I have seen estimates that suggest that even 15 percent of 
cancer treatment, for example, shifted to the hospital would 
actually cost Medicare an additional $200 million. And the 
intent of this was to try to get down drug costs for people, 
and I understand that. There is bipartisan concerns to this 
rule, proposed rule, as you know, so what I would suggest is I 
would urge CMS to hold off on the rule until we can resolve 
some of these issues.
    So the question I have is did CMS factor in the potential 
cost increase into its estimated savings from the program when 
it developed the proposed rule?
    Mr. Slavitt. So I think putting the proposal together we 
were, in fact, looking for that exact type of feedback relative 
to consequences and unintended consequences of anything we 
test. We've got a lot of feedback. We will take that feedback, 
including the specific feedback that you've mentioned which we 
have heard, into account when we finalize this.
    Mr. Bucshon. Well, I will appreciate that. And so if you do 
have an analysis of that different than what I suggested, on 
the increased costs because of shifting care to hospitals, if 
you could share that with my office and the committee I would 
appreciate it.
    Mr. Slavitt. OK. We will look into that.
    Mr. Bucshon. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from Illinois, Ms. Schakowsky, 5 
minutes for questions.
    Ms. Schakowsky. Thank you, Mr. Chairman. And I want to 
apologize to members of the panel. I was at another 
subcommittee hearing and was able to just arrive, but I thank 
you for being here to testify.
    I wanted to just highlight some of the benefits of the 
Affordable Care Act to my state of Illinois. During the third 
enrollment period 388,000 people from my state were able to 
gain coverage by enrolling in the health insurance marketplace. 
In 2014, nearly 195,000 people in Illinois with Medicaid saved 
almost $180 million on prescription drugs because of the 
Affordable Care Act with an average per person of $925 per 
beneficiary. That is a big deal.
    In 2015, the ACA funded 44 community health care centers in 
Illinois that provide primary and preventive health care to 
over 1.2 million Illinoisans including over 300,000 children 
and 900,000 racial and ethnic minorities. Over 475,000 
Illinoisans have gained Medicaid of CHIP coverage since the 
first open enrollment period as a result of Illinois' decision 
to expand Medicaid, and since November of last year, 200,000 
Illinois women gained access to preventive health care services 
with no cost sharing including reproductive health care, 
domestic violence counseling, and screening for cervical 
cancer.
    Despite the challenges that we are facing in Illinois, this 
law is doing incredible things for my constituents and I am 
encouraged by the progress that we are seeing.
    Mr. Slavitt, I wanted to talk to you about the increase in 
the cost of prescription drugs. How have rising drug costs, 
rising drug prices led to increases in insurance premiums and 
should we be doing more to control growing the cost of 
pharmaceuticals?
    Mr. Slavitt. This is an incredibly important question, 
Congresswoman, because when people are concerned as they should 
be about the cost of health insurance because the law requires 
that 85 percent of the cost be actual cost of health care, what 
they're really concerned about is the cost of the underlying 
health care system which is a top priority for us.
    And prescription drugs and the insecurity that both seniors 
as well as people on lower incomes face when they can't afford 
their prescription drugs is a really significant issue and it's 
only getting worse. And we are troubled when we see large 
increases in prescription drug costs and we have proposals for 
it as you know to attempt to find ways to begin to control 
those costs in ways that still allow us to create cures and 
innovations for our country, but also allows those cures and 
innovations to be accessible to everybody in the country who 
needs them.
    Ms. Schakowsky. Right. Also CMS has taken action I know to 
increase transparency for the price of drugs. For example, last 
year CMS released the Medicare Drug Spending Dashboard which 
details the price paid for many drugs covered by Medicare Parts 
B and D. The Dashboard also includes the average annual price 
increase of each drug and the average annual cost to 
beneficiaries. And this data is incredibly helpful for 
policymakers and providers to gain a better understanding of 
how drug prices are impacting public health programs and 
consumers.
    So Mr. Slavitt, why is increased transparency for drug 
pricing important and how will this information allow us to 
better protect Medicare, Medicaid and the beneficiaries?
    Mr. Slavitt. Well, first of all, these are federal dollars 
that we are spending and so, these in effect are people that 
are contractors to the federal government, and so it's 
important that taxpayers have insight into what we're spending 
our money on.
    And because we are not, as you know, able to negotiate Part 
D prices because we're restricted to, we think it's important 
at least that there is visibility into what things cost and 
particularly when there's cost increases, because in effect 
that's at the heart of many of the concerns, I think, even at 
this hearing today. As some of those underlying costs go up 
people then see their insurance premiums go up and that's what 
they have to deal with, so we're trying to bring more 
visibility to the root cause as opposed to just the headline 
issues.
    Ms. Schakowsky. Thank you and I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions. Put your mike on, please. Thank you.
    Mr. Bilirakis. Sorry about that. Administrator Slavitt, 
last December HHS OIG issued a report titled, CMS Could Not 
Effectively Ensure That Advanced Premium Tax Credit Payments 
Made Under the Affordable Care Act Were Only for Enrollees Who 
Paid Their Premiums.
    In the report, OIG stated that CMS was paying advanced 
premium tax credits based on the attestation of the insurance 
companies without verifying on an individual level that the 
monthly premiums were being paid. The OIG recommended that CMS 
institute an automated policy-based payment process to verify 
premium payments on a monthly or real-time basis.
    Yes or no, please, has CMS instituted automated policy-
based payment process with insurers for the federal 
marketplace?
    Mr. Slavitt. Yes.
    Mr. Bilirakis. OK, thank you. Are the state-based exchanges 
using an automated policy-based payment process at this time?
    Mr. Slavitt. I'd have to check.
    Mr. Bilirakis. Please check. Does CMS have any plans of 
running the policy payment process against prior years to find 
individuals who may have improperly claimed cost sharing 
reductions and premium tax credits when they were not current 
on their payments?
    Mr. Slavitt. I'm not sure if that's even possible, but I'd 
be glad to get back with you.
    Mr. Bilirakis. Please get back to us. I understand that the 
state exchanges are not participating, but I need clarification 
on that so please get back to me. Does CMS have a legal 
obligation to recoup advanced premium tax credits or cost 
sharing reductions that were improperly claimed or paid? Do 
they have a legal obligation? Do you have a legal obligation, 
CMS?
    Mr. Slavitt. So I think it depends on the circumstances, 
but some of this is under the provenance of the IRS.
    Mr. Bilirakis. OK. Well, again I want more clarification on 
that please.
    Ms. Jarmon, has the OIG tested the automated policy payment 
process that CMS is using?
    Ms. Jarmon. Not yet. As part of our ongoing work I should 
mention we reported on it in December of 2015. As part of our 
follow-up on the open recommendations we'll be looking at that.
    Mr. Bilirakis. When will you be looking at it?
    Ms. Jarmon. As part of our work in 2017.
    Mr. Bilirakis. In 2017?
    Ms. Jarmon. Right. We're looking at it now but----
    Mr. Bilirakis. So early part of '17?
    Ms. Jarmon [continuing]. It will be reported on sometime in 
2017.
    Mr. Bilirakis. Early part of '17 or----
    Ms. Jarmon. Probably sometime during the first part of '17, 
yes.
    Mr. Bilirakis. I am going to keep track of that.
    Mr. Slavitt, when CMS instituted this policy-based payment 
process for the federal marketplace how much did you find 
enrollment reduced? Can you give me that answer?
    Mr. Slavitt. I don't know. I don't know that it was 
material, but I'm certainly glad to get back to you on what 
that is.
    Mr. Bilirakis. OK. Well, all right. Again I want to follow 
up so let's get together soon. I need these answers.
    Mr. Slavitt. OK.
    Mr. Bilirakis. Thank you very much, and I will yield back, 
Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Oklahoma, Mr. Mullin, 5 minutes 
for questions.
    Mr. Mullin. Thank you, Mr. Chairman. And Mr. Slavitt, thank 
you again for being here. I know you and I have visited before, 
and the last time we visited you were in front of the O&I 
Committee and we were visiting about the risk medication 
program, the repayments that comes to it for the reinsurance. 
Are you recalling that?
    Mr. Slavitt. Was it risk adjustment or was it reinsurance?
    Mr. Mullin. Reinsurance.
    Mr. Slavitt. Reinsurance, OK.
    Mr. Mullin. Right. And at that time in the opening 
statement you said this year will add approximately 500 million 
to the U.S. Treasury. From the program as collections we will 
exceed the target amount to reimburse high cost claims for 
2015. That was a quote from you; is that correct?
    Mr. Slavitt. Sounds right.
    Mr. Mullin. Have you made any payments to date to the 
Treasurer on those?
    Mr. Slavitt. I think our collection date, if I'm not 
mistaken--this is from the top of my head--is either November 
15 or December 15. So we'll make the payment after that next 
collection.
    Mr. Mullin. So have you made any payments out of the 
reinsurance program?
    Mr. Slavitt. No. That'll be the payment we make when we----
    Mr. Mullin. Now have you made any payments to anybody out 
of the reinsurance program?
    Mr. Slavitt. Oh, to any companies?
    Mr. Mullin. Yes.
    Mr. Slavitt. This year?
    Mr. Mullin. Yes.
    Mr. Slavitt. I have to check.
    Mr. Mullin. I believe according to the information we 
received you have made several payments to carriers. In fact 
this was, the payments were made right before the open 
enrollment period. Are you familiar with that?
    Mr. Slavitt. You mean last year?
    Mr. Mullin. I believe so.
    Mr. Slavitt. Of last year, yes.
    Mr. Mullin. Yes. So has any payments to date been made to 
the Treasurer on this reinsurance program?
    Mr. Slavitt. As I said, the payment will be made after our 
next collection which is either November or December 15, I 
can't recall which.
    Mr. Mullin. OK. The reason why I ask this is because there 
has been a discussion of how much is supposed to be paid to the 
Treasurer and the federal law which says that the Treasurer 
should receive $5 billion not $500 million over the 3 years. 
Are you on target to hit the $5 billion mark?
    Mr. Slavitt. I recall the conversation from that hearing. I 
believe that that's not our understanding of the law, so----
    Mr. Mullin. I know. And I believe the interpretation of the 
law seems pretty clear and you guys decided to change that 
without notice. I am still----
    Mr. Slavitt. No, I'm sorry. We went through notice. We went 
through a proper formal notice and comment period.
    Mr. Mullin. And you responded back to us. How do you 
interpret the law?
    Mr. Slavitt. I think the law was not clear in cases where 
less than $12 billion----
    Mr. Mullin. Do you have it where you could read it?
    Mr. Slavitt. Pardon me?
    Mr. Mullin. Do you have it where you could read it, because 
it seemed pretty clear to us.
    Mr. Slavitt. The law, I believe, stated that what to do in 
cases where $12 billion was collected. The law was silent on 
what happened if less than $12 billion collected what the 
prioritization was.
    Mr. Mullin. Did you ask----
    Mr. Slavitt. Therefore we went through a formalized 
rulemaking process.
    Mr. Mullin. Did you ask guidance from Congress on that 
before you made that----
    Mr. Slavitt. We asked guidance from Congress and the 
general public by making this an open rulemaking process and we 
received----
    Mr. Mullin. But in a public comment period you really don't 
have to respond back to Congress on that. Did you specifically 
ask for our guidance on that?
    Mr. Slavitt. I believe we asked for everybody's guidance 
during that process.
    Mr. Mullin. If that is the case then why has there been 
confusion on the payments on if that $5 billion should be paid 
or shouldn't be paid?
    Mr. Slavitt. Because nobody in our comment period, if I'm 
not mistaken, objected to what we put forward in the proposal.
    Mr. Mullin. How long was that comment period open?
    Mr. Slavitt. I'll have to check. It was a standard comment 
period. It wasn't shorter than any normal period.
    Mr. Mullin. Because we have objected to it because we had 
you in O&I and had this conversation with you about it, so 
there has been a discussion on your interpretation of where the 
funds should go to. It seems to us or, well, let me say myself. 
It seems to me that the payments made to the insurance 
companies is questionable without paying it to the Treasurer in 
the amounts that is being repaid to them just to hold the 
premiums down.
    And it is not working, because in Oklahoma the only program 
we have left on the exchange is Blue Cross Blue Shield. They 
went up 42 percent already this year and I believe they are 
asking to go up another 40 to 70 percent this year. We are 
seeing prices skyrocket across the country right now when we 
were told that this program was going to cost, or bring 
premiums down.
    And the question I guess that I am trying to get to is your 
interpretation isn't working because it is still costing us 
more and the Treasurer isn't receiving the taxpayer dollars 
that we were promised in the $5 billion. And so if it is not 
working, then let us work together and try changing it or at 
least the tax dollars could be used to, in the appropriate way. 
I yield back. Thank you.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from New York, Mr. Tonko, 5 minutes 
for questions.
    Mr. Tonko. I thank you, Mr. Chair. In the 6 short years 
since its passage, the Affordable Care Act has transformed the 
health care industry and made coverage more accessible, more 
affordable, and more secure. And I would like to take this 
opportunity to share some of the encouraging benefits of the 
law that we have witnessed in my home state of New York.
    In New York, over 450,000 individuals applied for coverage 
in the marketplace during the ACA's third open enrollment 
period. As of 2015, the ACA has provided community health 
centers grantees in New York with over $445 million in funding 
that offers a broader array of primary care services, extends 
hours of operations, hires more providers, and develops 
clinical spaces.
    The nationwide uninsured rate continues to drop as the CDC 
reported last week. In New York State alone, the number of 
uninsured dropped by over 350,000 individuals between the years 
2013 and 2014. New Yorkers, like all Americans, have seen 
substantial benefits because of this law, and it is indeed 
reassuring to know that our work has allowed for these results 
to impact favorably those in New York.
    If I could continue on now with the issue of premium 
increases that I was hearing from the last individual, ever 
since the Republicans gained the majority in the House they 
have been sounding the alarm on the potential for skyrocketing 
premiums resulting from the reforms of the Affordable Care Act 
and the fact is that we have not seen this happen.
    In fact, the nonpartisan Congressional Budget Office, or 
CBO, made predictions about premiums around the time of the 
ACA's passage, and so to Administrator Slavitt I ask, did CBO 
predict that average premiums for 2016 would be higher than 
what the insurers actually charged this year?
    Mr. Slavitt. That's correct.
    Mr. Tonko. And why do you think premiums are coming down? 
Why are they lower than was expected or projected?
    Mr. Slavitt. I think that in some cases the premiums are 
lower because there's been good competition and good innovation 
and I think that's been a terrific and welcome part of the 
marketplace. And I think there's other occasions where the 
premiums were priced too low because I think no one knew 
exactly what things would cost, and therefore I think as a 
result we'll see more increases this year than we have in the 
past.
    Mr. Tonko. While those early reports have suggested that we 
may see those higher premiums in 2017, and why, can you explain 
why that might be the case? Why would they be higher?
    Mr. Slavitt. I think there's two principal reasons and most 
of them--and the good news, I think, is a lot of these really 
are centered on one-time effects. One is that by design the 
reinsurance that supported the marketplace expires January 1, 
2017, so there will be a meaningful increase just from that 
alone.
    And then secondly, I think now that you have insurance 
companies that have a couple years' worth of data on what 
things actually cost they can use that information to price 
appropriately. And I'd like to remind people that as a country 
this is the very first time we have said to people that if you 
are sick we will take care of you and we will allow you to buy 
insurance anyway. No one knew when we entered into this exactly 
what that would cost, but the great news is we're doing it.
    And no one likes to see costs go up and I don't think 
they're going to continue to go up beyond this year very 
significantly, on a large part because medical trends in this 
country are still at historic lows, but we would do something 
significant. We've got more work to do. We can do better. If 
Medicaid expands we'll do even better, and I look forward to 
continuing to work through this.
    Mr. Tonko. So in a sense there is like an outlier effect 
that impacted 2017, and would you expect 2018 to be different?
    Mr. Slavitt. Far be it from me to predict the future, but 
2018 will probably be a more normalized year and more in line 
with where past years have been the first couple of years.
    Mr. Tonko. OK. With that----
    Mr. Green. Mr. Chairman, could the gentleman yield me your 
last 10 seconds?
    Mr. Tonko. Sure, absolutely.
    Mr. Green. Thank you, Paul.
    Our colleague from Oklahoma, I meant to try and get time 
there. Blue Cross requested 45 percent. Mr. Slavitt, has that 
been considered by the state of Oklahoma or by CMS? Isn't that 
a request and it is not an actual increase?
    Mr. Slavitt. Yes. I'm not sure exactly where that stands at 
this point. Yes.
    Mr. Green. OK. Although I normally agree with Mr. Markwayne 
Mullin except on the football field but when our colleges play 
each other, so I will mention it to him later.
    Mr. Tonko. OK, with that I yield back, Mr. Chair.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from New York, Mr. Collins, 5 minutes 
for questions.
    Mr. Collins. Thank you, Mr. Chairman. Before I ask Mr. 
Slavitt a couple of questions I would like to just maybe 
briefly for the committee highlight some of the latest, very 
troubling news on the Affordable Care Act as it impacts western 
New York, the area of Buffalo that I represent.
    So in August, a month ago, Governor Andrew Cuomo's 
administration announced that the health insurance premiums for 
those on the state's Obamacare exchange will increase--this is 
after review--an average of 16.6 percent next year for over two 
million people enrolled in the program, many of them in western 
New York. Now I did say average. Some of the plans have already 
now been approved with a 29 percent increase and even 89 
percent for one plan.
    Now at the same time, the individual mandates compelling 
Americans to buy these health insurance plans with high 
premiums we are also continuing to see in our area big increase 
in deductibles and insurance companies facing multi-million 
dollar losses, terminating plans. So I am not sure how Mr. 
Slavitt could say he thinks this may be an outlier year.
    We are not seeing any of those trends that wouldn't 
continue on into the future. I don't think the President, I 
don't think anyone at CMS ever will acknowledge what western 
New Yorkers are living day to day, and that is the Affordable 
Care Act, Obamacare, is fundamentally flawed. It can't be fixed 
and is imposing unsustainable, ever-increasing costs on 
Americans including my western New York constituents. Now 
perhaps the next administration will have a better 
understanding of the health care marketplace, the plight of the 
middle class, and we can finally get rid of this unaffordable 
plan.
    But Mr. Slavitt, I would like to speak to you about an 
often overlooked aspect of the Affordable Care Act, a provision 
that many New Yorkers didn't know existed until they were 
kicked off their plans last year, kicked off in November last 
year.
    So last October, 200,000 New Yorkers were informed out of 
the blue that they would be kicked off Obamacare's CO-OP Health 
Republic and forced to find a new plan immediately. This CO-OP 
was propped up by more than $265 million of squandered taxpayer 
funding and lasted less than 2 years. The Health Republic of 
New York had the highest enrollment numbers in the nation so 
this wasn't a low enrollment problem, yet they lost 35 million 
in 2014, 53 million in the first half of 2015, basically the 
CO-OP was never going to be able to operate properly, and 
despite all these warnings and losses and losses, CMS neglected 
to even place the CO-OP in a corrective action plan.
    There is a couple words that come to mind--negligence, 
incompetence. So I guess, Mr. Slavitt, my first question is 
they weren't put into a corrective action plan, so if they are 
not what was the purpose of even having something we called 
corrective action plans?
    Mr. Slavitt. So certainly, and I will acknowledge that it's 
no secret that many of the CO-OPs across the country, not just 
New York, faced significant financial challenges. These are, 
you know, businesses that compete against much larger companies 
with limited capital bases and they have very little cushion 
for error.
    And I think in the case of New York, they, in the beginning 
of 2015, if I have my timing right I thought they were in a 
relatively good financial position and saw losses mount as 
claims costs came in throughout the year, I would say even more 
aggressively than any plan we could put on paper. I had a whole 
team up in New York working with the CO-OP and working with the 
state. In fact, I think our auditors were ones that were 
pointing out some of the problems to the CO-OP.
    Mr. Collins. Now I mean, let me just say you can't defend 
the indefensible. I hear you try. But, you know, Mr. Slavitt, 
even after this what CMS did was even more egregious. They 
forced current plans to take those people that were kicked off.
    They told those plans they had to accept them at the low 
pricing that Health Republic was charging, in November when 
many of them had already hit deductibles, and the current 
health plans then suffered millions upon millions of dollars of 
additional losses because CMS said you have got to take these 
people. I am sorry their deductibles are burned out. You can 
only charge them what the low rates were to begin with.
    And so what we ended up with, and I will use the words 
again, after losses and losses and them not being placed, it 
was negligence and incompetence of CMS which hurt taxpayers, 
hurt participants and hurt other health insurance companies, 
something I call a lose-lose-lose, and that to me was 
unacceptable. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from California, Mr. Cardenas, 5 
minutes for questions.
    Mr. Cardenas. Thank you very much. I have a bit of a 
different narrative coming from the state of California as to 
what the Affordable Care Act has done for millions of 
Californians. I don't have time to speak to the tens of 
millions of Americans across America who are in a better 
position with their access to health care that they didn't have 
before, but that having been said the Affordable Care Act has 
improved millions of lives in my state.
    For example, we have been able to expand Medicaid with over 
three million Californians having gained access to Medicaid or 
CHIP since 2013. I know you are not allowed to applaud in this 
room, but I am sure you are applauding inside. As of April of 
this year, 70 percent of Californians who were previously 
uninsured before the Affordable Care Act now have quality, 
affordable health insurance because of the Affordable Care Act.
    Medicare beneficiaries in California have saved more than 
1.2 billion on prescription drugs because of the Affordable 
Care Act. The expansion of preventive services with no 
deductible or copay under the Affordable Care Act allowed more 
than 3.6 million Californians with the Medicare to access 
preventive care services in 2014 alone.
    I am pleased with the progress that has happened in 
California, but yet at the same time any time a law is passed--
and with all due respect the Affordable Care Act is a product 
of the legislative bodies of the United States of America. And 
every time we have passed laws--I personally have been passing 
laws for 20 years both at the state, local, and here at the 
national level and I have never, ever written a law myself nor 
have I ever seen any one of my colleagues that I have served 
with in the last 20 years, Republican or Democrat, pass a 
perfect law that doesn't need some changes subsequent to the 
initial passage.
    It is unfortunate I believe that we have a Congress of the 
United States, the majority parties that want to just tear down 
this law. It is unfortunate. What we should be doing is looking 
at the disparities and the things that need to be fixed. I know 
some of my colleagues on the other side of the aisle have been 
talking about some of those things, but it is one thing to just 
point out flaws and then throw up our hands and say, oh my 
gosh, isn't this horrible.
    That is not our job as legislatively elected people, 
democratically elected individuals who are supposed to be 
responsible and make sure that we fix things when we see 
something wrong. And it is unfortunate that we haven't advanced 
but very small, small minor changes to the Affordable Care Act 
through the legislative process.
    I do agree that there are many changes that need to be 
made, but I am appalled at the idea that we take opportunities 
like today to just say that this is wrong and it needs to be 
repealed. That is not the case. I for one in a portion of my 
life when I was a boy lived in a household where we didn't have 
access to health care. And what that meant was that my mother 
would give me some aspirin, send me to bed, and literally pray 
that I would wake up the next day feeling better. And if I 
didn't, what happened was my family with my hardworking father 
providing for 13 people, 11 children and him and my mother, 
every single day would go to work.
    But because we didn't have health care coverage our only 
alternative was to show up in the emergency room when we 
thought somebody just might die. Because of the Affordable Care 
Act, now over 20 million people in this country who were in 
that situation literally overnight are no longer in that 
situation. And the number of people who are getting true access 
to health care is in fact growing.
    That is what the Affordable Care Act is about. One life at 
a time through a massive law, thousands of pages that yes, it 
does have flaws. But the atrocity of the Affordable Care Act is 
subsequent to that law being enacted that we as a legislature, 
collectively, are not making the necessary changes that we all 
can easily identify.
    It is embarrassing that in the most capable country in the 
world, in the most powerful elected bodies in the world that we 
effectively have done almost nothing to improve the health care 
of Americans since this law has been passed. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the vice chair of the Health Subcommittee, the 
gentleman from Kentucky, Mr. Guthrie, 5 minutes for questions.
    Mr. Guthrie. Thank you, Mr. Chairman. And I want to follow 
on that. Governor Bevin is actually trying to take a program 
that he inherited that was a hundred percent federal taxpayer 
paid for now the state has got to start putting money into the 
program and trying to make it work. He is trying to make the 
improvements that people say, well, Republicans over here--it 
is some political hit. He is actually trying to put a program 
together that worked.
    I heard my colleague earlier talk about Kentucky and I 
heard him speak earlier back home during the break. And I went 
and met, spent hours with Kentucky's Medicaid Task Force and 
tried to figure out exactly what they are trying to do and what 
they are trying to do is make a program work.
    Now you cited a study, we could continue to cut 
universities and education and move that money into Medicaid, 
hire people on the short term and create jobs in health care 
but it is not for long-term sustainability of our state. And so 
what Governor Bevin is trying to do is trying to treat the 
expanded population of able bodied, not traditional Medicaid of 
frail, elderly, disabled people that are chronically ill, he is 
trying to take able bodied and treat them more like traditional 
insurance.
    And Mr. Slavitt, is it unreasonable to treat able bodied, 
non-traditional Medicaid, is it unreasonable to have a Medicaid 
program set up for them in an expanded state that treats it 
more like traditional insurance? That is what Governor Bevin is 
trying to do. Is that unreasonable?
    Mr. Slavitt. So I'm going to try to not get into commenting 
on the status of this waiver request given that we are just 
open for a public comment period and it would be inappropriate 
for me to do that.
    Mr. Guthrie. OK. I was wondering a couple of things. A 
couple of things that I have heard my colleague from Kentucky 
call a poison pill, he says able bodied, not traditional 
Medicaid spent in Medicaid--should pay a premium that could be 
up to $15 a month. We have heard people talk about paying 800, 
900, $10,000 a year--at $15 a month.
    The other one is if you are able bodied that you have to 
have a community engagement requirement. Go to work for 20 
hours a week, go to do a service project for 20 hours a week or 
go to school for 20 hours a week because there is an 
ideological difference as my friend from Kentucky said earlier. 
One is, 25 percent of Kentucky is on Medicaid. The other 
ideological difference is let's create a system and a Medicaid 
program where people were transitioned off so they can improve 
themselves, go to school, become productive and move forward.
    And that is exactly what Governor Bevin is trying to do. 
And if that is unreasonable to CMS, if that is unreasonable to 
my colleague from Kentucky, I know it is not unreasonable to 
the majority of Americans that people who receive something for 
free should have--should, one, to improve themselves have an 
education requirement at least to move forward and that is what 
Governor Bevin is trying to do.
    I want to switch to one other state real quick. In 
Louisiana they just expanded Medicaid. This started July 1st. 
But in Louisiana they also are allowing people that are 
currently into the exchange if they want to continue in the 
exchange they can continue in the exchange even if they are 
Medicaid eligible.
    And I have, if I could submit to the record The Advocate, 
which is a Baton Rouge newspaper, and I will quote from it. It 
says the State says that people who bought individual policies 
through the federal marketplace but now qualify for Medicaid 
under state expansion can keep their Obamacare plans if they 
prefer them over Medicaid. They just have to keep paying their 
premiums.
    Mr. Slavitt, is that correct that if you qualify for 
Medicaid you can maintain your Obamacare premium subsidized in 
the marketplace?
    Mr. Slavitt. I'd have to look at the details of that. I'm 
not sure.
    Mr. Guthrie. Well, when will CMS explicitly explain the 
rules of the road and how do we know CMS isn't inappropriately 
double-dipping? They could be Medicaid qualified and be 
receiving premiums. I don't think within the statute allows 
them to do that.
    Mr. Slavitt. Yes, let me check on that. I hadn't seen that 
article.
    Mr. Guthrie. OK. Another one----
    Mr. Pitts. Without objection, that article will be placed 
in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Guthrie. Thank you. So moving on to another topic, in 
February of this year, Secretary Burwell said CMS would check 
whether exchange enrollees with subsidies are enrolled in 
Medicaid or CHIP. She said I quote, notices will be--let me 
start this over--whether exchange enrollees with subsidies are 
also enrolled in Medicaid or CHIP. And she said notices will be 
sent in May to consumers who are enrolled in both. Has that 
moved forward?
    Mr. Slavitt. Yes, it has.
    Mr. Guthrie. Did that go forward in May or--there is a New 
York Times article has talked about it happening in August.
    Mr. Slavitt. I'm not sure of the date.
    Mr. Guthrie. You don't have any consumers that have been 
disenrolled in Medicaid or exchange coverage as a result of 
this?
    Mr. Slavitt. I don't know how many, but I'd be happy to get 
back to you at your office.
    Mr. Guthrie. OK, thank you. Any savings a taxpayer would 
appreciate.
    Mr. Slavitt. Yes.
    Mr. Guthrie. Thank you very much and I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from New York, Mr. Engel, 5 minutes 
for questions.
    Mr. Engel. Thank you. Thank you, Mr. Chairman. Thank you, 
Mr. Green. Thank you for holding today's hearings.
    Let me say this in terms of an overview. You know, any 
major bill or major undertaking that has been passed by 
Congress needs to be tweaked once we see how effective it is, 
what we see, when we see what the problems are. It is true with 
Medicaid and Medicare, it is true with any big bill, and that 
is true with the Affordable Care Act.
    The way I look at it, the problem is our friends in the 
majority don't want to fix it. They want to break it so it will 
go away. There are some problems with it, there is no doubt 
about it. But if we didn't vote to repeal it 63 times and voted 
to improve it 63 times I think we would have a much better law.
    And having been on this committee when we were first 
drafting this law, I know that there are many different, you 
know, opinions and there are many things that I and others 
thought should have been put into the bill that were not put 
into the bill because we took the Senate-based bill and we 
thought we would be able to negotiate it, and then through 
circumstances we couldn't do it.
    So I would just say that I think, they say if it ain't 
broke, don't fix it. Well, it is a little bit broken and it can 
be fixed and we should fix it instead of trying to kill it. So 
to echo Mr. Pallone, I am mystified by Republican attempts to 
paint a rosy picture of the insurance market prior to the 
passage of the Affordable Care Act.
    Let's go back and let's remember what it was like denying 
insurance to people with preexisting conditions, forcing 
certain populations to pay outrageous rates, applying lifetime 
limits to care. Before the ACA this was standard operating 
procedure in the individual insurance marketplace and it was 
incredibly harmful to our families, friends and constituents. 
And again not to mention some popular things like keeping your 
child on having insurance on your policy until he or she is 26 
years old.
    So we have come a long way. An estimated 20 million 
Americans have gained health insurance through the ACA. My 
state of New York, there are some problems but basically it is 
going very, very well and we can rest easier knowing that a 
sudden illness won't wreak havoc on our finances. And 129 
million Americans with preexisting conditions like asthma or 
diabetes can no longer be turned away or charged more on 
account of their health status. More than 39 million seniors on 
Medicare have received free preventive services without copays 
thanks to the Affordable Care Act's preventive services 
benefit.
    And like any major legislation, as I said, it is not 
perfect but we have made a world of difference for millions of 
Americans who were once denied coverage or who could not afford 
it. So, you know, I just think that we should do right by the 
American people and stop trying to turn this into a partisan 
issue. There are a lot of good ideas on both sides of the 
aisle. You know, when I go back to my district I hear people 
telling me, can't you guys get along? Can't you guys work 
together? The American people want to see us work together, not 
lurch from one thing to another.
    So let me ask Mr. Slavitt--thank you for being here today. 
I think as I mentioned before New York provides a good example 
of what is possible when the federal government has a willing 
and enthusiastic partner in ACA implementation. Every county in 
New York has seen its uninsured rate decline, and on average 
individual premium rates for qualified health plans are almost 
50 percent lower than they were before ACA implementation.
    So would you talk about what your experience has been in 
states that have obstructed efforts to implement the ACA versus 
your experience in states that have been good partners like New 
York?
    Mr. Slavitt. Yes. So I think there's a fairly well 
documented difference in the uninsured rate now and 
Congresswoman DeGette, I think, referred to this, where states 
that have expanded Medicaid have lower rates of uninsured and 
number of benefits than the other states.
    I might also just comment, Congressman Engel, on your 
earlier comment about working together, you know, my 
understanding of the history of Medicare very much falls in 
line with what you said, which is that there were a number of 
efforts that were required after Medicare Advantage passed to 
find the things that weren't working as well as they should and 
to amend them.
    And as a result I think we have one of the most popular, 
longstanding bedrock programs today in our country in Medicare. 
And so I think we have the same opportunity without a doubt 
here to not just do what we've done but continue to do better. 
And we look forward to working with the Congress on this.
    Mr. Engel. If I might, thank you. You noted during your 
testimony that CMS, and I quote you, has learned more about 
what kinds of outreach are most effective as you seek to reach 
out to the remaining Americans who are uninsured and eligible 
to enroll in marketplace coverage. So I am pleased to hear that 
CMS is drawing upon lessons learned to reach Americans who 
remain uninsured.
    Can you talk about why targeted outreach is so important 
and how might we expect these efforts to affect the risk pool 
of enrollees?
    Mr. Pitts. The gentleman's time is expired.
    Mr. Engel. OK. I will take it in writing.
    Mr. Pitts. Please respond in writing.
    Mr. Slavitt. I'll be happy to do that.
    Mr. Engel. Thank you, Mr. Chairman.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentlelady from North Carolina, Mrs. Ellmers, 5 
minutes for questions.
    Mrs. Ellmers. Thank you, Mr. Chairman. I thank the panel 
for being here today.
    Mr. Slavitt, I would like to go back to some of the issues 
with premium increases that are projected for 2017. There has 
been some discussion here today about the projected cost 
increases for 2017 when it comes to the premiums, and I would 
just like to shed some clarity on it. And I know that you feel 
as strongly as we in Congress do about transparency and making 
sure that information to consumers is readily available.
    In North Carolina, one of the top insurers has projected 
that there may need to be about a little less than 20 percent 
increase in their premiums, and I have heard from some of my 
colleagues here substantially larger increases in premiums. And 
I really do believe that this is something that even though we 
in Congress understand it because we have the ability to go to 
the, you know, to get that information and our staff are able 
to do that, the average person, the average American really 
doesn't.
    So I would like to understand what that process is. For 
instance, in the discussion about the Oklahoma increases you 
had basically said that you weren't sure that that had been 
determined yet. At what point will Oklahoma's increases be 
determined and how will the rest of America know each state's 
premium increases?
    Mr. Slavitt. Yes, thank you, Congresswoman. So right now, 
you know, and each state is on a slightly different schedule, 
states are going through a rate review process and each state 
does it a little bit differently which is why it's hard to 
generalize. And they're in the process of reviewing the rates 
and then they'll finalize and approve them.
    Most of the states, I can't think of one that doesn't, but 
most of the states make that information public immediately 
within their states as that happens and then they get reported 
in a number of studies. So I think they've been quite visible, 
but I can get back to you if you have any specific questions 
about states.
    Mrs. Ellmers. Well, I am concerned and I am wondering if 
CMS, if you actually at some point post this information, you 
know, so that it is readily available. And as far as a date, I 
know that you said that the process is being played out right 
now. Correct me if I am wrong, you said November 1st is the 
beginning of the enrollment period for the Affordable Care Act, 
so will these numbers be known by November 1st?
    Mr. Slavitt. Yes. Consumers will have access to this, the 
information beforehand. What we typically do is we open the Web 
site up early so that even before November 1st consumers can 
get a sense of what things cost and as a result the general 
public also has access to that information.
    Mrs. Ellmers. OK. So just for clarification purposes, any 
American who is ready to sign up or start looking at insurance 
for next year they can know that CMS is going to have that 
information by November 1st.
    Mr. Slavitt. Yes. That's what we've done historically, yes.
    Mrs. Ellmers. In the past, OK. And I just, you know, for 
the purposes of making sure this information is readily 
available, I have dropped a bill, 5960, which is basically the 
Consumer Healthcare Insurance Transparency Act, to make sure 
that we are making that message known to CMS that we would love 
for that information to be out there for consumers by November 
1st. And I would like to see that happen and I hope that we 
will be able to do that again for those same purposes that you 
believe in which is consumer transparency.
    In the remaining time that I have I would like to ask, for 
the insurance companies that have come forward who have, I 
mean, you know, three major insurance companies have said that 
they are backing out of the Affordable Care plan or limiting 
the number, the most recent being Humana, and others who have 
discussed the possibility of this, what do you say to that? I 
mean, if this is working within a manner where only minor 
tweaks need to be made which, you know, my colleagues, Democrat 
colleagues continue to say that we just need to make it better, 
this really doesn't seem like it is getting better. So what do 
you say to that?
    Mr. Slavitt. Yes. Well, I think one thing we all have to 
recognize is that it's not only change for us, it's not only 
change for consumers, it's change for these insurance companies 
as well. The business model is different in the way that they 
historically operated where they would essentially be able to 
assess people's health before they would write policies has 
gone away.
    And so, you know, insurance companies are adjusting and I 
think they're all--it's hard to generalize, all adjusting 
differently. Many, many companies are doing that well and doing 
it successfully. Many, as it's been public as you pointed out 
Congresswoman, have retrenched. Even those that have retrenched 
a little bit are still committing hundreds of millions of 
dollars of capital to do so, but they're doing it at different 
paces. And I think that's just an acknowledgment of the kind of 
transformation that I think everyone has to go through.
    Mrs. Ellmers. Thank you so much, and I yield back.
    Mr. Pitts. The chair thanks the gentlelady and now 
recognizes the gentlelady from Indiana, Mrs. Brooks, 5 minutes 
for questions.
    Mrs. Brooks. Thank you, Mr. Chairman. Administrator 
Slavitt, when you came before the Oversight Committee on 
December 8, 2015, you came to testify about the sustainability 
of the state-based exchanges. And at that hearing you testify, 
and I quote, over 200 million of the original grant awards have 
already been returned to the federal government and we are in 
the process of collecting and returning more, end of quote.
    And in fact, there was significant media attention that 
went out that day indicating that CMS had recouped, recouped 
over 200 million from failed state exchanges. The committee 
then issued a report in May, and following the release of that 
report you responded to the committee stating that in fact the 
CMS had recouped $1.6 million from the 17 state-based 
exchanges, not the 200 million initially stated during the 
hearing. And you clarified that it was simply an estimate of 
funds that CMS had de-obligated from states that didn't 
establish the exchanges.
    But could you please explain how CMS arrived at that 
estimate initially when you came to testify in December, 
because it is a pretty significant discrepancy.
    Mr. Slavitt. So I believe that the transcript shows that I 
was asked a question about 5 billion-plus of funds that were 
sent out total, and at that time I estimated that of those 5 
point, I think it was 5 billion, 200 million or so was being 
covered. In fact that number is now over 300 million.
    Since that time I've got a letter from the subcommittee 
chair who said that wasn't, in fact, the question he thought he 
was asking. He thought he was asking something different. So we 
clarified that he was in fact asking about something different. 
And I certainly will take responsibility for making sure that 
I'm clear, because when I come before these committees whether 
the news is good or bad my job is to tell it straight. And if I 
don't do that then I need to do better, and I will.
    But, so there was a miscommunication. I will say that as 
for actual numbers, you know, we just, I believe, received a 
check for about $14.2 million on funds recovered from a state 
that did have trouble, so it's actually, it's more updated than 
the 1.2 million and so that continues ongoing. And we do keep 
the committee updated. I'm happy to continue to do that.
    Mrs. Brooks. And so the discrepancy was with respect to 
characterization of recouping versus de-obligating; is that 
correct?
    Mr. Slavitt. I think that's right.
    Mrs. Brooks. And so the recoupment was actually 1.6 million 
at that time?
    Mr. Slavitt. It's greater than that today.
    Mrs. Brooks. And can you tell me today, and thank you. That 
was my next question. Can you please talk to me about an update 
on the amount recouped from the 17 state-based exchanges today?
    Mr. Slavitt. I don't have the exact figures with me, but I 
know that it's at least higher by about $14 million because we 
just received a check back from one of the states for over $14 
million. So, but I can get you a complete accounting.
    Mrs. Brooks. And which state is that?
    Mr. Slavitt. The state of Maryland.
    Mrs. Brooks. So State of Maryland just wrote a check back 
for 14 million in addition to the 1.6 million, and at the time 
the 1.6 million, do you have any idea how many states that had 
come from, the 1.6 million?
    Mr. Slavitt. I'm not sure exactly. It's three or four, 
something like that.
    Mrs. Brooks. OK. And so the other, then, you know, 12 or so 
states, can you talk with us about what is being done with 
respect to the recoupment of the funds?
    Mr. Slavitt. Recoupment of which funds?
    Mrs. Brooks. The recoupment that we initially began talking 
about. Are you expecting to receive additional funds from other 
states?
    Mr. Slavitt. So we expect to recover funds that are 
improperly spent and that we can document are improperly spent. 
We, with the help of the OIG who's been very helpful in 
providing analytics, you know, go out and look for and assess 
when funds have been improperly spent. But, and those funds we 
do recover when, and we also, I should say, review many funds 
before they are spent. And so we don't need to go through a 
collection process if we required an approval process which we 
put in place as well.
    Mrs. Brooks. And the 14 million that Maryland just 
returned, was that for improperly spent funds?
    Mr. Slavitt. So that was for their technology vendor, was 
essentially the state got into a dispute with them for 
overcharging them or wasting technology spending. They settled 
the lawsuit and the 14 million was the down payment on the 
federal share of that funding. I think the total that will come 
in from Maryland is 32 million based on that specific thing.
    Mrs. Brooks. Thank you, my time is up. However, I would be 
interested in the committee receiving a report on the status of 
where the recoupment of funds is today from all of the states.
    Mr. Slavitt. We will update you.
    Mrs. Brooks. Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentlelady. I would like to 
clarify that Mr. Slavitt made the $200 million estimate in his 
opening statement not in response to a question.
    That concludes the first round of questions of members 
present. We will go to one follow-up per side and I will start. 
I recognize myself 5 minutes for that purpose.
    To follow up on Mr. Griffith's questions about risk 
corridors, Mr. Slavitt, you said that there is an obligation to 
make insurers whole. My question is how does CMS plan to pay 
for the risk corridor obligation to make insurers whole under 
that program because there are no appropriated funds to do so?
    Mr. Slavitt. I can't speak to that directly today, but I 
mean, this is as you know as I've said earlier the subject of a 
lawsuit, so I think we'll let that settle out.
    Mr. Pitts. Well, this is not a question for DOJ because not 
all insurers are in the litigation. And so the question is how 
do you plan to pay for the obligation when there are not 
appropriated funds to do so?
    Mr. Slavitt. Well, I'll get back to you. I'll consult with 
OMB and get back to you.
    Mr. Pitts. Thank you. Another question, Mr. Slavitt, the 
committee's investigation into the CO-OP failures examined the 
negative impact of the 17 CO-OP closures and what they had on 
individuals enrolled in health insurance plans and the closures 
created uncertainty as individuals were forced to find new 
health insurance coverage.
    In some cases with mid-term shutdowns, individuals had to 
ask fast in order to avoid gaps in coverage. Based on this 
finding, one of the recommendations from the committee's report 
released today is that the individuals be exempt from the 
individual mandate penalty if their coverage under a plan 
offered by a CO-OP is terminated due to the failure of a CO-OP.
    We believe this recommendation is common sense as we should 
not be punishing individuals who make a good faith effort to 
comply with the individual mandate as a result of their plan no 
longer being offered. Does CMS agree with this recommendation?
    Mr. Slavitt. Well, we didn't receive that report until late 
in the evening last night so I haven't had time to study it in 
detail, but we will.
    Mr. Pitts. Will you please respond to that question once 
you view the report?
    Mr. Slavitt. Will do.
    Mr. Pitts. Thank you. That is the only follow-up questions 
I had. The chair will recognize the ranking member, Mr. Green, 
for his follow-up.
    Mr. Green. Thank you, Mr. Chairman, and I have two issues. 
One, my colleague from Denver, Colorado, earlier mentioned the 
GAO study. If you would listen to all the questions on the 
Republican side you would think the people are up in arms about 
how bad the Affordable Care Act. But the GAO study that she 
mentioned was that there were studies in Colorado, Indiana, 
Montana, North Carolina and Vermont, and consumers, sister 
shareholders concluded that most exchange customers are 
satisfied with their coverage despite longstanding issues of 
out-of-pocket expenses, health literacy and access.
    Mr. Bagdoyan, is that something the GAO was going to 
comment on, that study that was released on Monday?
    Mr. Bagdoyan. In what sense, Mr. Green?
    Mr. Green. Oh, just one, why you only did five states, 
because a lot of us would like to see the consumer feelings on 
the Affordable Care Act. I mean, you know, of course we trust 
the GAO for your work.
    Mr. Bagdoyan. Unfortunately I was not responsible for 
running that engagement that resulted in that report, but we'll 
be happy to get back to you in writing with an answer as to why 
those----
    Mr. Green. OK, I appreciate it.
    Mr. Bagdoyan. Sure.
    Mr. Green. We wasted countless hours in this committee, and 
my Republican colleagues criticize provision after provision of 
the Affordable Care Act and root for its failure. We should 
instead be using this time to build the law's successes by 
improving quality affordable care now available to our 
constituents.
    Administrator Slavitt, I applaud CMS's diligent work to 
implement the law and I know your agency has taken steps where 
possible to make administrative fixes, but some of the fixes 
require legislative action. Unfortunately, my Republican 
colleagues are only interested in undermining, weakening or 
repealing the law.
    Mr. Slavitt, what steps has the Administration taken to 
help ensure the long-term success of the ACA, but more 
importantly, I would like to ask if you know what steps should 
be taken by statute for Congress to do to help make the 
Affordable Care Act moving forward and to be more successful?
    And again I don't think in the 2 or 3 minutes or so you 
have, but I would be glad if you could get back with us----
    Mr. Slavitt. OK.
    Mr. Green [continuing]. And CMS could, one, list what CMS 
has done, but then also say these are issues that you have that 
Congress needs to act on them so we could fix it so we could 
cover more people.
    Mr. Slavitt. We'll be glad to do that. Thank you.
    Mr. Green. OK. Mr. Chairman, I thank you and I yield back 
my time.
    Mr. Pitts. The chair thanks the gentleman. That concludes 
the questions of the members present. We will have some follow-
up questions in writing and other members who maybe were not 
able to attend may have questions in writing. We will provide 
those to you. We ask that you please respond promptly.
    And members should, they have 10 business days to submit 
questions for the record, so members should submit their 
questions by the close of business on Wednesday, September 28. 
Another very informative and productive hearing, thank you very 
much for your expertise and without objection, the hearing 
stands adjourned.
    [Whereupon, at 12:52 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
    
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